Slower US price rise beneficial to China’s textile industry? –
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Slower US price rise beneficial to China’s textile industry?

2022-11-29 08:34:09 CCFGroup

The US Labor Department announced on November 10th that the U.S. consumer price index (CPI) in October increased by 0.4% month-on-month and 7.7% year-on-year.


The inflation data is lower than expectation, indicating that the US inflation situation has improved slightly. The "Wall Street Journal" analyzed that the year-on-year increase in the US CPI in October is the lowest since January this year, but still at a historically high level, which may prompt the Federal Reserve to slow down the pace of interest rate hikes.


As the pace of interest rate hikes is expected to slow down, the financial market has revised the valuation of some commodities, and both the US stock market and the commodity market have rebounded significantly during the day. On November 11th, China's commodity market generally surged.


Item Price Change (%)
SSEC 3,081 1.46
SZI 11,125 1.98
ZCE cotton 13,280 1.14
PTA futures 5,408 2.74
MEG futures 3,915 2.01
PSF futures 7,176 2.22
Paper pulp futures 6,792 2.54
*Note: futures refer to the most actively traded contract (time of data sampling: 1:20 p.m. November 11th, 2022)


We can understand the price recovery in the commodity market. For commodity markets, cost and valuation determine their prices, and changes in interest rate expectations will obviously affect the cost of capital, which in turn adjusts the valuation of the corresponding financial commodity. But this logic is only aimed at the financial market. For textile and weaving entities, there is no need to pay much attention to such financial market prosperity. As far as entities are concerned, supply, demand and circulation are always the foremost element, which is followed by profit.


Although the latest CPI of U.S. is lower than expected, the 7.7% increase is still a high level, which is rarely seen in history. Behind the lower-than-expected figure, it is also worth worrying whether the consumption of U.S. is lower than expected.


At the same time, the Fed is still expected to raise the interest rate in spite of slower pace. The Fed's interest rate resolution in November is 4%. Even if the inflation is slightly lower than expected, the Fed is still likely to raise the interest rate to 4.5% in December. As of now, the LPR announced by China in October is only 3.65%. The interest rate gap between China and the U.S. is still hardly beneficial to foreign investment or international trade.


For China's chemical fiber and textile entities, it is necessary to pay appropriate attention to changes in the financial market and reasonably control costs, but there is no need to pay too much attention to the ups and downs of the financial market. Maintaining liquidity and financial health remains the top priority for resisting the economic downturn cycle right now.