By  on October 18, 2006

WASHINGTON — Wholesale prices of American-made women's and girls' apparel held steady in September, according to the Labor Department's Producer Price Index released Tuesday.

Across the economy, prices on all U.S. goods fell a seasonally adjusted 1.3 percent, led by steep declines in the energy sector, where prices fell 8.4 percent. The drop in overall prices was the largest since April 2003.

Excluding the food and energy areas, which can vary widely, so-called "core" prices increased 0.6 percent, three times the 0.2 percent economists were expecting. The unexpectedly sharp increase in core prices contributed to a down day on Wall Street, where the Dow Jones Industrial Average fell 0.3 percent, to 11,950.02.

"It's muddled because, while this is a benign report, it's less benign than was expected because of this 0.6 percent top-line measure," said Mark McMullen, senior economist at Moody's "I think the markets took that to heart, while the overall story is the same."

Where there was some price inflation, it was in intermediate goods, such as textiles, and not finished products, he said.

Against a year earlier, wholesale prices on women's and girls' apparel fell 0.2 percent in September, and there was a drop of 4 percent in underwear and nightwear. Prices of woven shirts and blouses, on the other hand, rose 2.1 percent and jeans and slacks were up 0.9 percent.

However, since domestically produced apparel accounts for a small fraction of clothing sold at retail, no wide trend can be disseminated from the data. The Consumer Price Index, a broader measure of inflation that tracks prices of all goods sold at retail, including imports, is due out today.

In the textiles area, yarn prices grew 2.1 percent, greige fabrics were up 4.8 percent and knit prices advanced 0.6 percent.

"Notwithstanding the jump in the core index, the September report is unequivocally good news on the inflation front," Global Insight U.S. Economist Brian Bethune said in a report.

In August, the Federal Reserve Board halted a steady two-year campaign of hiking interest rates to combat higher prices, a drive that bumped up the benchmark federal funds rate 17 times, to 5.25 percent."The bottom line is that the Federal Reserve…will be encouraged by the rather compelling trend decline in core producer prices," said Bethune.

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