Soaring cotton prices put pressure on inflation Tuesday, 14 September 2010
Soaring cotton prices threaten to put further pressure on inflation amid a chorus of warnings over the likely impact on price tags.
Devastating floods in Pakistan – one of the world’s largest producers – and fears over this year’s crop in China have sent cotton prices surging to 15-year highs in recent weeks.
High street fashion giants Primark, Next and Debenhams have flagged cost pressures as tightening global supplies threaten to push up prices.
The cotton crisis comes at a bad time for retailers, who are already battling against a range of factors, such as higher freight costs, wage inflation in China and the impending VAT hike to 20% in January.
Retail experts at Verdict Research are forecasting that clothing inflation will hit 4.4% in the UK this year – the highest level for 24 years.
And Next sent shivers through the sector when it said last month that prices may rise by as much as 8% in 2011, with budget retailer Primark adding to the woes by cautioning over profit margins in the face of higher cotton costs.
The latest figures show that cotton prices are up 54% year-on-year, with the floods in Pakistan seeing supply fall far short of demand.
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