Softgoods, a bulwark of retailing, is a $50 billion business at the wholesale level. The softgoods pipeline starts with the cotton farmers and synthetic fiber producers and leads up through the textile mills and apparel manufacturers. Within the pipeline, the profit prospects for textile and apparel industries are undergoing a marked change. The apparel manufacturers enjoyed a position of relative strength in the past decade due primarily to an increasing flow of low-priced textile imports that created domestic overcapacity and low prices in fabrics. Since 1971, however, a more realistic valuation of the dollar relative to other major currencies has eliminated much of foreign textile producers' price advantage. More recently, world shortages and higher prices of both natural and synthetic fibers have widened the raw materials cost advantage of domestic textile producers to the point where imports generally sell at a premium to U.S.-produced fabrics. While these circumstances would, under normal conditions, have generated substantial increases in domestic spinning and weaving capacities to meet the resulting increase in demand, the existence of price controls, originally imposed during a period of depressed textile industry conditions, has held back the workings of the free market mechanism. Thus mills are now having to run at high operating rates to meet even relativity weak softgoods demand at the consumer level. Although price controls are likely to be abandoned soon, the business uncertainties now developing will probably discourage the textile expansion that relaxation of price controls would formerly have invited. What will this mean to the textile and apparel industries? Over the near term, earning performance of both groups could be unfavorable if depressed consumer confidence causes a drawn out recession. Under such conditions, eventual inventory liquidation at the retail level will back up the pipeline at both the apparel and textile stages. But even then, the capacity bottlenecks at the textile manufacturing level would cause the industry's results to hold up relatively well in comparison to those of the apparel industry. When consumer confidence returns, tight fabric supplies will result in firmer price structures and higher and more stable earnings growth for the textile producers and greater relative earnings volatility for the apparel manufacturers. To those familiar with the historic extreme cyclicality of the textile business, relative stability and favorable growth of the textile companies' earnings should be an eye-opener. On the other hand, the apparel companies, whose earnings have grown strongly over the past decade with relatively minor setbacks in the 1970 and 1967 economic downturns, are likely to turn in a relatively disappointing performance. These are the major reasons for the change in the relative positions of the textile and apparel industries: currency exchange rates, agricultural policies and price controls.