The biggest problem the world apparel industry faces at the start of 2012 is the ongoing combination of rising product costs and falling sales. The 'Great Apparel Slumpflation of winter 2011/2012,' as he calls it, is confusing everyone, everywhere, according to Mike Flanagan.

The growth in worldwide demand for clothing is slowing very abruptly indeed - and doing so just about everywhere. But the helter-skelter fluctuations in the cost of making clothes, and the way those fluctuations differ between countries, make the slowdown difficult to summarise. And anyway, businesses just can't pass those costs on to buyers.

2012 slumpflation packs a multiple whammy
In the United States for example, the dollar value of sales at specialist clothing retailers in November 2011 was 3.7% up year-on-year. But apparel inflation was 4.8%, implying that the average clothing specialist sold 1.1% fewer clothes than the year before.

In practice, though, life was tougher for America's garment retailers. Retail apparel sales, in inflated dollars, euros or yen, are growing more slowly than apparel inflation throughout the rich world. In the EU, for example, the latest data refers to October, when turnover at clothing stores was 1.4% down on 2010, but apparel inflation was only 2.5% - so around 3.9% fewer clothes were sold.

But the 'Great Apparel Slumpflation of Winter 2011/12' has a few extra nasty features.

Producer slumpflation's got worse, faster, than retail slumpflation
In January 2011, Clothesource Tradetrak shows US buyers imported 11% more garments, measured in square metres, than in January 2010. In October 2011, those buyers imported 7.7% less - or, if you prefer it, Asian and Central American garment makers sold the US 7.7% fewer garments.

At the beginning of 2011, garment imports into the US cost 4.5% more per square metre than in 2010; by October they cost 17.7% more, meaning US clothing retailers' product costs were growing almost four times as fast as the prices they were able to charge their customers.

Retail slumpflation's practically global
The collapse in consumer demand for apparel is almost universal. The real volume of consumer sales, after stripping out the confusion of retail price inflation, is falling a bit faster in Europe than in the US (though producer sales to Europe haven't been falling as fast, which we'll come back to in a minute).

But Indian retailers are also claiming the increase in the value of annual apparel sales is lower than apparel inflation - and the latest data on retail sales in Brazil shows the same problem.

Though recent Chinese data is currently all over the place, the China General Chamber of Commerce said the volume of clothing sales during October in "100 key department stores" across the country was 5.8% down on a year earlier. You haven't misread that: one major source claims the Chinese domestic apparel market fell faster in October than in Europe.

Some other sources have a different story - but they're all more or less showing single-digit annual volume growth at best. A marked contrast to the month-after-month 20% growth, and falling prices, that characterised Chinese apparel retailing a year ago.

The 2012 Slumpflation might be worrying brands and retailers more than producers
Consider Gujerat Heavy Chemicals Limited, a medium-size weaving business and India's dominant soda ash producer (no I'm not sure either what soda ash has got to do with garments or textiles).

In 2006, its ebullient CEO, Sanjay Dalmia, bought struggling UK home textile retailer Roseby's as part of a strategic plan to move into branded curtains and other home textiles in the UK and US. Roseby's UK performance proved disappointing, so Dalmia closed it, but used its name and some systems to open a similar chain in India - claiming in 2009 it would turn into a global $200bn retail chain by 2014.

Reality of course has now struck. It took Roseby's fuddy-duffy British owners 85 years to go from foundation to bankruptcy, but in India, under Dalmia's dynamic management, the same process took just 30 months, with administrators called in little more than two years after Roseby's Indian opening.

A salutary lesson to all those Western chains convinced the problems of their struggling chains at home will be solved by expanding to the other side of the globe.

During the year to September 2011, the Indian economy put on 911,000 jobs, according to the country's Ministry of Labour and Employment (it's put on 2.4m since the economic downturn started in September 2008). The apparel/textile industry lost jobs - but IT and Business Process Outsourcing (all those help desks in Bangalore) put on 796,000. Metalworking put on 107,000 and I bet there were a fair few new soda ash making jobs too.

Throughout the past two decades, one of the oddest aspects of the poor-country garment making businesses supplying Western retailers and brands was the other businesses the garment factory owners also owned.

Many of those "other" industries respond to the economic cycle in a different way from textile manufacture or retailing - and mostly, they're not doing as badly now as the garment makers or clothes stores that looked so promising a few years back.

The overall Indian and Chinese economies are still growing, even if their apparel and textile businesses aren't. China's Ministry of Industry and Information Technology (MIIT) announced on 5 January that the number of textile enterprises posting losses in the 11 months to November 2011 jumped 28.7% year-on-year, and the total value of the losses they posted grew 75.9%.

The often bizarre range of pies factory owners have had a finger in is making slumpflation a lot less traumatic for them than for their customers. In fast-growing poor economies, finding a new pie to replace garment making is a lot easier than finding a similar alternative to a slumpflated Western chain.

Slumpflation comes in so many guises it's impossible to generalise
The details of the problem vary between countries and businesses. Many think things will take a distinct turn for the worse in Europe - and some even believe recent falls in cotton prices might make it easier for US brands and retailers to put their prices up as fast as their costs are going up.

That's a huge simplification though. Raw cotton and cotton yarn prices at the end of 2011 were 20%-30% lower than at the end of 2010, and most man-made fibre prices were falling at much the same rate - so many retailers, expecting the cost of imported clothing to ease off, seem to have chosen to live with a few months of depressed margins.

They may have to wait a bit longer than they expected: fabric prices (and wool) still seem ahead of a year ago (denim's about 40% dearer), and garment makers in much of Asia seem to be losing their fight against substantial government-mandated minimum wage rises from January 2012. Proposals include up to 40% hikes in Jordan and Thailand, 29% in Vietnam, 23% in Sichuan and 19% in Shenzhen

The extraordinary range - and speed of changes - of different inflation (and deflation) rates at each point of the supply chain is making it almost impossible to generalise about many industry problems, because every business is being hit differently.

And it's confusing everyone. National trade associations preening themselves on dollar growth rates of 20% or so in mid 2011 are often only now realising their members actually sold fewer garments, or spun less cloth, and are having to cut staff as a result.

And from India to Honduras, firms that were boasting just a few months ago about all the business they'd be picking up now China was so uncompetitive are now moaning about the "unfair" energy, wage, or loan interest costs they're lumbered with and the Chinese aren't.

Whichever way you churn the numbers, though, global apparel slumpflation makes prospects for most spinners, weavers, garment makers, wholesalers, brands and retailers look pretty miserable. The only real difficulty is deciding whether 2012 going to be just gloomy or outright catastrophic for most of them.

Western customer demand is at best flat, and those customers aren't prepared to increase the prices they're going to pay to match the cost increases producers are still facing.

Slumpflation's hitting everyone
There's no alternative untapped market developing-country producers can sell to (except possibly Russia), and most remotely promising larger developing countries (like Turkey or Brazil) are building new barriers against foreign imports faster than the Chinese can build railways.

Bizarrely, in a complete turnaround from its policy of the past few decades, India is a partial exception to this. It has just opened its markets up to duty-free apparel imports from Bangladesh and Nepal, and it couldn't have chosen a better time to infuriate its struggling domestic manufacturers, who've mostly reacted with hysterical paranoia.

There's no significant untapped manufacturing centre that rich-country brands and retailers can source from either. While there's a surprising amount of pressure building up from many human rights activists for the US to withdraw its ban on imports from Burma, that pressure's unlikely to attract many American legislators this side of the November presidential elections. And as long as the US bans Burmese garments, most other rich-world buyers will also remain leery of buying from the country.

So at the very least 2012 is going to be a year of attrition, with buyers trying to minimise the cost increases vendors are looking for, and both sides contemplating falling sales and production volumes, even if cash sales imply a growth that isn't there.

Does it have to be like that?
In developing countries, there's no shortage of unsolicited advice being offered to governments about how to avoid slumpflation in the local textile and garment industry. Just about all, though, require the one thing practically no developing government has: the ability to spend money on new national infrastructure, or on tax "incentives" to garment or textile makers.

In the West, most observers think demand is probably going to get slightly worse - but I'm not so sure.

I think there are two optimistic futures for the global garment industry. One I suspect is a non-starter: the bright world of fast highways from ecologically sustainable factories to efficient deep-water ports superintended by honest (and therefore adequately paid) Customs officials.

I'm convinced that's a non-starter unless it's funded by profitable, growing, local garment and textile businesses - which need growing demand from Western customers.

Personally, I think there is at least one vast untapped market out there. But explaining what it is will have to wait until next month. It all starts with a 50th anniversary that occurred on 5 January 2012. And I bet none of you even noticed it.