By  on August 15, 2013

WASHINGTON — Retail apparel prices rose a seasonally adjusted 0.6 percent in July, giving retailers some pricing power for the back-to-school season, the Consumer Price Index, released by the Labor Department, showed on Thursday.

The increase in July apparel prices followed a 0.9 percent increase in June.

Women’s apparel prices increased 1.8 percent in July. Within the category, prices for suits and separates rose 2.7 percent, while combined prices for underwear, nightwear, sportswear and accessories increased 1.3 percent. Dress prices rose 0.9 percent last month, while outerwear prices showed the only sign of weakness, falling 2 percent.

Men’s apparel prices fell 1.5 percent in July. In that category, combined prices for suits, sport coats and outerwear plunged 6.1 percent, while prices for pants and suits fell 0.6 percent. Prices for shirts and sweaters declined 0.1 percent, while prices for furnishings rose 0.4 percent.

Girls’ apparel prices jumped 3.9 percent in July, while boys’ apparel prices rose 1.5 percent.

“It is a bit surprising that the apparel CPI is maintaining a strong three -month stretch of increases while import prices generally have been falling,” said Jeet Dutta, senior economist at Moody’s Analytics. “So, it does appear at the retail level that there is some pricing power.”

Jutta said apparel retail pricing strength could be attributed to better inventory management.

“Generally speaking, and this is not limited to apparel, inventories have been rather well managed pretty much all year,” he said. “One would think wholesale and retail inventories are rather well managed and that has possibly allowed retailers to maintain some pricing power.”

But Dutta cautioned that he expects retailers to lose some pricing power heading into fall, as retail apparel prices become more aligned with falling apparel import prices.

Apparel import prices fell about 0.1 percent in July, Dutta said.

“It doesn’t seem to me that this level of pricing power can continue at this pace,” Dutta said. “There have been instances in the past where there has been this kind of disconnect, where the CPI runs above import prices, but eventually the two have gotten better aligned so I expect that to happen again and for the CPI for apparel to adjust down.”

The overall CPI, a key gauge of inflation, edged up a seasonally adjusted 0.2 percent in July, after rising 0.5 percent in June. The core CPI, excluding the volatile food and energy sectors, also increased 0.2 percent last month.

Chris G. Christopher, Jr., director of consumer economics at IHS Global Insight, said the overall CPI increase of 0.2 percent was driven primarily by a significant spike of 6.3 percent in gas prices, which he attributed to the political instability and civil unrest in Egypt.

“In July, apparel, transportation and tobacco prices showed significant gains while food prices increased only 0.1 percent,” Christopher said.

He warned that retailers in general are still struggling with maintaining pricing power.

“It has become very clear that many retailers are having a hard time increasing their selling prices since consumers are proceeding with a very cautious attitude towards spending,” Christopher said. “Many retailers are mindful of costs and margins since they have lost a considerable amount of pricing power. Looking ahead, consumer price increases are likely to be modest for the remainder of the year.”

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