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We think that the slowdown in India's industrial production has particularly strong implications for the apparel industry -- and we feel even stronger that this will likely fly right under Wall Street's radar screen.

Consider this. Indian Industrial Production slowed to 3% in March from an 8.6% rate in February. Not good. Aside from increased signs of a slowdown in Asia, we need to highlight the Indian/Chinese production trade off.
The chart below shows that over the past 7 years, China's share of US apparel imports went from 8% to 30%. That was a seismic event for the industry. The share gain was very steady, with one major exception - the first 3 quarters of 2006. During that time period, China began to hold firm on price, subsequently lost share, and it went right into India's pocket.

Now, China is holding firm on price again, simply because it can. But with both production and exports slowing in India as Singh tames the inflation beast in hopes of securing re-election, we're not so sure if India will be there to bail out US apparel importers by hacking prices and eating the margin pinch like it did in 2006.

Yet more proof that the US apparel industry needs to pick one of three options; a) either succumb to the prospect of sustained higher prices out of Asia, b) find some ingenious way to grow margins in a slow growth, high-cost environment (i.e. M&A), or c) attempt to pass through higher prices to consumers, and likely take it on the chin with unit demand.

Bad stuff all around.