By  on January 20, 2005

WASHINGTON — Retail prices for women’s apparel fell a sharp 2.8 percent in December on a seasonally adjusted basis, reflecting deep discounting for the holidays.

The U.S. Labor Department’s Consumer Price Index, the closely watched inflation barometer released Wednesday, showed that women’s apparel prices dropped a seasonally adjusted 1.4 percent in 2004. Prices for all apparel fell 0.4 percent in December and dropped 0.2 percent for the year.

“It reflects the promotional activity that took place in December,” said Carl Steidtmann, chief economist at Deloitte Research. “The reason for the decline in December was certainly temporary, but the change in quota treatment for China could make the decline in apparel prices even broader in 2005.”

Charles McMillion, president and chief economist at MBG Information Services, said apparel was the only major component of the “market basket” to suffer deflationary pricing.

“Apparel prices have now fallen to the same nominal levels as in January 1990,” McMillion said in a statement. “Over this period, total retail prices have risen by 49.9 percent, which means that, in relative terms, apparel prices have now fallen by half over the past 15 years.”

It appears the retail price outlook won’t improve any time soon.

“With the continued surge of cut-throat pricing from imported apparel, weakening domestic demand growth and large portions of productive capacity remaining idle, I expect these deflationary pressures on the industry will continue and intensify in 2005,” McMillion said.

The decrease in apparel prices contributed to the decline in prices for all retail goods, which fell 0.1 percent in December. The core index, which doesn’t include normally volatile food and energy prices, inched up 0.2 percent, the third straight month of increases.

For the year, all retail prices rose 3.3 percent, driven primarily by soaring fuel prices, which rose 16.6 percent. Core prices rose a moderate 2.2 percent.

Steidtmann said the real issue to look at is productivity growth.

“One reason we have had good inflation performance for the past couple of years is productivity growth has been so high,” he said. “If we continued to sustain high productivity growth of 3 percent or better, it will keep inflation well in line.”Among women’s apparel categories tracked by the government, prices for outerwear fell a seasonally adjusted 1.7 percent in December and 5.2 percent for the year, while retail prices for dresses dipped 3.3 percent for the month and 3.6 percent against a year ago.

Retail prices for suits and separates declined 4.3 percent in December and 0.3 percent year-over-year, while prices for underwear, nightwear, sportswear and accessories fell 4.3 percent last month and 0.3 percent against a year ago.

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