The latest data from the National Bureau of Statistics shows that China's June 2026 Producer Price Index (PPI) rose 4.1% year-on-year, but a dangerous 'scissor gap' has emerged between upstream and downstream prices in the textile industry. Upstream raw material purchase prices surged 6.4% year-on-year, while downstream apparel factory prices fell 1.0%. This means that for every garment or fabric produced, raw material and energy costs are increasing, but selling prices are declining—margins are squeezed from both ends.
Upstream price surges: chemicals and energy are the culprits
Two factors are driving upstream costs. First, chemical raw material purchase prices soared 11.5% year-on-year, directly raising costs for polyester, nylon, and auxiliaries used in textile processing. This hits synthetic fiber, dyeing, and finishing sectors hardest. Second, fuel and power purchase prices rose 11.8% year-on-year, increasing energy costs for weaving, dyeing, and drying. Additionally, textile raw material purchase prices rose 3.3% year-on-year, with cotton, chemical fibers, and recycled fibers continuing to climb.
Looking at PPI structure, producer goods prices rose 5.5% year-on-year, driven by mining (up 16.5%) and raw materials (up 8.6%), while processing industry prices rose only 3.0%. This indicates cost transmission is already blocked at the midstream level. Consumer goods prices fell 0.9% overall, with apparel factory prices down 1.0%, showing no willingness in the end market to accept price increases.
Downstream pressure: apparel and home textile prices weaken, transmission chain broken
The persistent weakness in downstream textile and garment factory prices reflects ample supply and fierce competition in consumer markets. Brands face high channel inventories, and both retailers and consumers are highly sensitive to price increases. Firms attempt to pass on raw material and energy cost increases downstream, but the market does not accept them. As a result, profit margins in chemical fiber, spinning, printing, dyeing, and footwear sectors continue to narrow.
This structural impact on textile manufacturers is significant. In the short term, firms rely on order scale and process optimization to offset cost pressures. But scale has limits, and cost-cutting potential is finite. When raw material and energy costs both rise over 10% while product prices fall, margin erosion is almost inevitable.
Macro logic behind the price trends
This PPI scissor gap is not driven by a single factor. High international commodity, energy, and non-ferrous metal prices push up chemical and fiber raw material costs externally. Meanwhile, rapid growth in computing power, new energy, and energy storage sectors boosts demand for non-ferrous metals and electrical materials, indirectly crowding out traditional textile raw material supply. Summer peak energy demand raises coal and electricity costs, further burdening textile firms.
From an industrial cluster perspective, major textile hubs like Keqiao, Shengze, and Nantong are seeing price divergence: high-count, high-density, and differentiated functional fabrics maintain relatively firm prices, while conventional varieties face fiercer competition. This reflects firms actively adjusting product structures toward higher value-added products under cost pressure.