Diverging Sentiment in Textile Markets: Overall Recovery but Profit Pressure on Merchants

The June 2026 sentiment data from China's textile and apparel professional markets reveals a critical signal: operational conditions are recovering, but merchant profitability has not kept pace. While both the manager and merchant indices rose, their sub-indicators paint divergent pictures.

Market Operations: Foot Traffic and Store Opening Rates Improve

From the manager perspective, the June sentiment index came in at 49.78, up 0.43 percentage points month-over-month, approaching the 50 boom-bust line. Sub-indices for logistics volume, foot traffic, and store opening rates all increased, by 0.64, 0.64, and 0.32 points respectively. The share of markets reporting declining foot traffic narrowed from 22.58% to 16.13%, while those reporting increased store openings jumped from 0% to 6.45%. The rent index remained in expansion territory at 50.65, indicating a generally stable operating environment for market management.

Merchant Side: Sales Recover but Margins Shrink

Merchant data tells a more complex story. The merchant sentiment index reached 50.07, up 0.34 points, but only the sales volume index (50.14) and profitability index (49.86) improved. The average selling price index fell from 49.52 to 49.30, staying below 50 for a second month. The share of merchants reporting decreased profits surged from 10.96% to 19.58%, while those reporting lower selling prices expanded from 6.85% to 18.88%. This suggests merchants are sacrificing price to boost volume, leading to a "revenue up, profit down" scenario.

Costs and Inventory: Pressure Accumulates, Turnover Accelerates

The composite cost index dropped from 50.82 to 50.63, still above 50 but trending downward. The share of merchants reporting increased operating costs jumped from 0% to 6.99%, indicating rising pressure from raw materials or labor. The inventory index was 50.00, up 0.21 points, with the share of merchants reporting reduced inventory rising from 2.05% to 10.49%, confirming faster destocking—which eases cash flow pressure but also confirms price-cutting behavior.

E-commerce: The Only Bright Spot Across All Indicators

E-commerce was the standout performer. The manager e-commerce index was 51.61, up 0.64 points; the merchant e-commerce index was 50.49, up 0.35 points. The share of markets with increased e-commerce sales rose from 16.13% to 22.58%, while merchants rose from 1.37% to 9.79%. This underscores the accelerating integration of online and offline channels, making e-commerce a vital sales outlet for market merchants. For buyers, this means greater price transparency in traditional wholesale markets.

Outlook: Sentiment Diverges, Managers Turn Cautious

Forward-looking indices reveal a split between managers and merchants. The manager forward index fell 2.91 points to 50.32, while the merchant forward index rose 0.70 points to 50.84. This divergence suggests market operators are skeptical about sustained demand, while merchants hold more optimistic expectations for the traditionally slow July season.

Practical Recommendations

For Buyers - With merchants actively destocking, focus on categories where the average selling price index stays below 50 for the best bargaining power. - Use online wholesale platform quotes as a baseline reference for offline negotiations, given increased price transparency. - Monitor the declining cost index; if upstream raw material prices continue to rise, terminal discounts may narrow in July-August. Consider locking in orders early.

For Foreign Trade Companies - Take advantage of rising foot traffic and e-commerce activity in domestic markets to pilot domestic sales channels. - Merchants' squeezed margins make them highly price-sensitive. Offering cost-effective spot goods or quick-response supply chain solutions can open collaboration opportunities. - With the inventory index near 50, the destocking cycle may be ending. Expect restocking demand to pick up in Q3, so prepare inventory of regular SKUs in advance.