If you haven’t noticed the price of clothing and other goods rising, you soon will. The current challenges will not only affect the promotional apparel market, but other industries where products are globally sourced.

• Raw material costs (i.e. cotton, polyester, nylon, etc.)
• Inflation in developing countries
• Labor costs
• Duties and tariffs
• Transportation costs
• Foreign exchange rates
• Non-market costs

These factors, of course, do not affect every product in the same way, and suppliers also have many ways that they can help control prices. Nonetheless, current pricing is being affected by two primary factors: raw material and labor costs. Raw material costs have been rapidly increasing over the last several years. Taking cotton as an example, the following chart illustrates this dramatic increase over the last five years.

The other key factor is labor costs. China is undergoing rapid business growth, which is resulting both in a shortage of labor and in workers’ demand for higher wages, as we’ve recently seen affect the automotive industry. Meanwhile, factories in other regions do not have sufficient infrastructure to support an increase in consumer demand.

Amid these two driving factors, there are smaller factors at play, as well. Most notably, the Chinese government, in anticipation of the upcoming G20 Summit, announced that they will allow their currency (RMB) to appreciate. This will increase import prices across Asia, negatively impacting the price of industry apparel.

With so many influencing factors, it is impossible to predict the full extent of the price pressures on all industries. But best estimates suggest that we face a near-to-mid-term period of rising costs until new production capacity is possible.