Textile-Clothing

In 2024 and the first half of 2025, the global textile and clothing industry continued to deal with gloomy conditions. The economic environment is expected to remain complex into 2026. Looking further out to next year, growth in global clothing demand is expected to stay modest in 2026, albeit with regional differences.

Consumers are likely to remain cost-conscious. This would notably favour ultra-fast fashion platforms and second-hand clothing. Facing limited pricing power, these developments could weigh on fashion retailers’ profitability.

Some specific components of the supply chain should prove more resilient. On the raw material side, consumer and regulatory pressure will support demand for recycled, natural, and artificial fibres. In terms of end-use markets, demand for medical, sportswear, and outdoor textiles and clothing is expected to remain strong. In contrast, the home textiles market continues to suffer from a durably weak, but slightly improving, construction market. Luxury goods should also continue to have to deal with slower growth.

In the context of fragile demand, fibre prices are expected to remain relatively stable. The fundamentals of the oil market are trending downward for 2025–2026, which should limit upward pressure on synthetic fibres. However, the geopolitical environment could trigger episodes of volatility, while climate-related events also pose a risk. If fibre prices were to rise, clothing manufacturers would likely bear the brunt.

The supply chain is fragmented from an industrial standpoint but remains geographically concentrated around China. The latter supplies one-third of intermediate inputs and over 40% of global clothing exports, although this share is declining. US tariff policy could accelerate this decline in favour of alternative suppliers benefiting from more favourable customs conditions.

Fragile economic environment

2024 was another bleak year for the textile-clothing industry, with global demand for apparel and textiles showing slight improvement but still lagging despite the easing of inflation. This year and into next, global clothing and footwear consumption growth is expected to remain lacklustre and show regional disparities. In China, household consumption continued to exhibit moderate growth in early 2025, a trend that is likely to persist into 2026. In the EU, demand has gradually improved throughout 2025 and is expected to maintain a steady, albeit modest, increase in 2026. Meanwhile, in the US, shifting tariff policies and rising inflation expectations may have temporarily boosted apparel sales in the first half of 2025. However, they are set to increase at a slower pace in the following quarters.

In this context of uncertainty and fragile demand, cost-conscious consumer behavior is likely to persist, reinforcing a long-term trend of declining apparel spending as a share of household retail sales. This would continue to encourage demand for the low-cost clothing offered by fast fashion players and ultra-fast fashion online platforms. The trend is also driving interest in value-for-money alternatives such as dupes and off-price offerings. It also fuels the expansion of the second-hand market, with the development of specialist shops online platforms such as Vinted. In the face of this segment’s progress, fashion brands and retailers have dedicated part of their stores to secondhand sales. For example, this is the case of H&M, which created secondhand corners in some of its stores.

Continued pressure for fashion retail

The context adds to the challenges facing fashion retailers, which have already had to adapt to increased competition due to the rise of online sales. This, plus the growing role played by the internet and social networks in everyday life, has led fashion retail, as well as brands, to focus more and more on these tools in their marketing strategy. The subdued environment for clothing consumption makes it all the more important for players in the sector to make use of these tools, including through partnerships with influencers.

All of the above has exerted pressure on fashion stores’ profitability and limits their ability to raise prices. Partly reflecting this pressure, while growth in apparel sale value outpaced volume expansion in 2024 (and other preceding years), the retail sales value of clothing and accessories in the US rose by 4.2% in the first five months of 2025, i.e., on a similar par to that of sales volume.

At global level, clothing retailers already had to address pressures on profitability in 2024. The global EBITDA margin for listed companies fell continuously over the year, declining from a median of 10.3% in the last quarter of 2023 to 9.7% in the same period of 2024. Fashion brands that directly sell their products in their own stores, are expected to navigate price constraints more effectively, as they typically operate with higher margins. In 2024, the segment’s median EBITDA margin averaged 15.8% globally (vs. 14.8% in 2023).

Eco-friendly, medical, and outdoor textiles stand out

Consumers’ interest in fast fashion and ultra-fast fashion seems to contradict growing enthusiasm in more responsible and environmentally friendly clothing production, which offers fewer items at generally higher prices. Yet the divide between fast fashion and sustainable fashion is not absolute. Aware of consumers' and governments’ growing interest in these issues, fashion brands, including fast fashion giants, are integrating sustainability into their strategies. H&M, for instance, has committed to sourcing 100% of its materials from recycled or sustainably sourced origins by 2030. As a result, while overall demand for textiles and clothing will remain fragile overall in 2026, certain specific components of the supply chain could stand out. This is the case of recycled fibres (7.7% of textile fiber production in 2023). Nevertheless, the market share of recycled fibre has stagnated in recent years, largely due to higher production costs. Moreover, the widespread use of fibre blends in textiles presents significant challenges for post-consumer recycling. The separation of different fiber types is labour-intensive, and chemical and mechanical recycling processes often require different conditions, making large-scale recycling even more costly.

Similarly, natural and artificial fibres (approximately 26% and 6%, respectively, of global textile fiber production in 2023) are likely to be in greater demand than synthetic fibres. Although artificial (also called man-made cellulosic) fibres are produced using chemical processes, they are derived from natural materials - mainly wood. In addition, their production does not require the use of pesticides, insecticides, or large quantities of water, as is the case with cotton. This may explain why exports of artificial fibres rose by 8.8% in 2024, compared with a fall of 1.3% for synthetic fibres. The main exporters of the former two - China (37% in 2022), the US (19%) and Indonesia (14%) - could therefore benefit. That said, growing environmental awareness will also drive concerns about deforestation, to which artificial fibre production may contribute. The European deforestation regulation, which will ban the import of products derived from deforestation from 30 December 2025, could therefore affect certain articles made from artificial fibres.

Apart from the ecological issues, technical textiles used in the medical field and specialised textiles and clothing for sports and outdoor activities (20-25% of the clothing and footwear market) should keep enjoying robust demand. In contrast, the outlook for indoor textiles - the second most important use of textile fibres after clothing - will remain fragile, in keeping with the state of the global construction sector. The luxury sector is also facing challenging conditions. The ongoing economic slowdown in China, along with consumer and government disapproval of ostentatious displays of wealth, could continue to drive demand for more understated and affordable products.

Textile fibre prices set to remain moderate

Amid fragile weak demand, fibre prices are expected to remain relatively stable. Although global cotton output is set to decline slightly over 2025-2026 season (July 2025-August 2026), subdued growth in mill consumption and elevated stock levels should help maintain prices, broadly in line with conditions observed during the first half of 2025. The cotton A index, a widely used benchmark for international cotton prices, averaged USD 78 over the first five months of this year. While still sizeable, the use of cotton has decreased over the past decades, going from approximately half the global textile fibre production to a mere 20% at present. Meanwhile, the use of polyester has gained traction and now accounts for roughly 60% of global fibre output. Weak demand trends are also exerting downward pressure on polyester prices.

The main risk affecting this outlook lies in the oil markets. As synthetic fibres are derived from petroleum, their pricing is closely tied to oil market trends. Natural fibres are also impacted because of their substitutability to synthetic fibres. Although supply-demand fundamentals point to an easing of oil prices in the second half of 2025 and beyond, geopolitical tensions – particularly between Israel and Iran – have heightened market uncertainty. Following the initial Israeli strikes on Iran on 13 June 2025, Brent crude oil prices surged by more than 20% within a week. Another risk that could drive up raw material prices relates to climate. Textile fibres are largely produced in economies that are, population-wise, among the 10 countries most affected by climatic disasters over the 2005-2024 period. In 2024, 47% and 59% of cotton and chemical fibre (synthetic + artificial) exports, respectively, came from these countries.

If textile fibre prices rose, clothing and footwear manufacturers would likely be the weakest link in the apparel value chain. In 2021, the sharp increase in the price of yarn and fabric sold by textile manufacturers was only partially passed on to garment factories' selling prices. A further increase in input costs could therefore weigh on clothing manufacturers' margins. This vulnerability is due to the sizeable share of raw materials (yarns, fabrics and accessories) in their production costs, estimated at between 40% and 60%. Furthermore, manufacturers have limited scope to pass on these cost increases to their customers given the imbalance of power in favour of fashion brands and the fragility of end consumer demand. Clothing manufacturers also often have little leeway to optimise their purchases, as the supply of raw materials is frequently imposed by their clients.

It should be noted that climate risk not only impacts the production of textile fibers but also the rest of the clothing value chain (yarn, fabric and garment), which is highly concentrated in countries vulnerable to climatic hazards such as China, Bangladesh and Vietnam.

Supply chain faced with US customs duties

The sector's supply chain is fragmented. The various stages – design, manufacturing or harvesting of raw materials, spinning, weaving, finishing, and garment manufacturing – are generally carried out by separate companies, often in different countries. China remains a key player throughout this chain. Upstream, it supplies one-third of intermediate textile inputs (staple fibres and yarns). Downstream, it still accounts for over 40% of the volume of clothing and footwear exports (2023). Although still dominant, it is worth noting that this share has been declining since peaking at 54% in 2010.

Beyond a potential negative impact on US demand, US tariff policy could mainly affect the downstream part of the supply chain. Finished clothing and textile products account for the majority of US imports in this sector. In this context, brands could favour suppliers subject to lower US tariffs. China could therefore see its market share continue to decline. At the time of writing, Beijing remains the main target of the Trump administration's tariff strategy. Conversely, the change could benefit textile and clothing exporters in certain European countries, North Africa, and Turkey, which not only enjoy lower US tariffs but also geographical proximity to the European market (for more information on supply chain diversification in the clothing sector, click here).