WASHINGTON — Retail prices on women’s apparel jumped 2.9 percent last month, matching the second-largest seasonally adjusted increase on record and potentially pointing to some pricing gains after years of declines.
Still, March prices were down 1 percent compared with a year earlier and marked a 9.2 percent drop over the past five years. The rise matched the September 1989 increase, but was below the March 1990 advance of 3 percent, the highest since 1978, the first year records were kept. For the first quarter of 2006, women’s apparel prices were up 0.8 percent, while prices on all apparel rose 0.3 percent.
“I do expect apparel prices not to fall this year, but to rise, because basically the Asian manufacturer’s under more cost pressures, wages are rising in China,” said Peter Morici, professor at the University of Maryland’s Robert H. Smith School of Business. “I’m not expecting rampant inflation, but the price cap that has been on apparel prices until recently is likely to relent. At least, apparel prices should stay constant.”
Within the women’s category, prices on suits and separates increased 3.6 percent for the month, but were down 0.6 percent against a year earlier, while dress prices gained 0.5 percent for the month and were up 7 percent from a year earlier.
Peter Rodriguez, associate professor of business administration at the University of Virginia’s Darden School of Business, agreed that the apparel sector is seeing “a rebound from heavy expansion and dramatically lower prices that we’ve seen over the past five years.”
Rising apparel prices, along with soaring gas prices, contributed to a 0.4 percent increase for all goods and services in March — compared with a 0.1 percent gain in February, according to the Labor Department’s Consumer Price Index released Wednesday.
Rodriguez also pegged the CPI growth to higher commodity prices driven by heavy demand, particularly as the middle class grows in emerging economies around the world.
Factoring out the volatile food and energy sectors, the so-called core rate of inflation increased 0.3 percent for the month, with apparel and shelter making up 70 percent of the increase.
Wall Street and economists closely watch the CPI for signs of inflation, in part to gauge whether the Federal Reserve Board will raise interest rates in its efforts to keep the economy from overheating.
This story first appeared in the April 20, 2006 issue of WWD. Subscribe Today.
The Fed, which last month raised its benchmark federal funds interest rate a quarter-point to 4.75 percent, recently indicated that its rate hikes could be nearing an end. If prices grow too quickly, however, the Fed will counter with higher interest rates. Fed board members meet next on May 10.
“The overall [CPI] number is a large number and a scary number,” said Edward Leamer, director of UCLA’s Anderson Forecast. “But it looks as though, if you get into the details of it, the basic inflationary tendency of the U.S. economy is still pretty controlled.”