WASHINGTON — Falling retail apparel prices continued to break records in July, with a seasonally adjusted decline of 1 percent — the largest one-month drop in July since 1948, the Labor Department’s Consumer Price Index revealed Friday.

The increasing influx of imports and influence of discounters mixed with summer sales and lackluster consumer demand to hammer prices in July, according to economists, who consider the CPI the main U.S. inflation gauge.

On a year-over-year basis, all apparel prices plunged 3.2 percent, reflecting the continual erosion of prices. Women’s retail prices fell a seasonally adjusted 0.8 percent in July and fell sharply by 3.8 percent against July 2001. Prices for girls’ were down 1.9 percent in July and down 3 percent against the year ago.

The year-over-year decline in women’s prices marked the 15th consecutive annual decline in the category, a Labor analyst said.

"This is now an impact of price cutting by retailers and also a lack of demand," said Rajeev Dhawan, director of economic forecasting at Georgia State University.

Ira Kalish, chief economist at Retail Forward, said he expects weak demand to continue over the next several months, driven in part by the decline in the equity market.

"That has been a major contribution to the weakness in demand, especially at department and specialty stores," he said.

Kalish said imports have also contributed to deflationary retail prices, but he expects that to reverse next year if the dollar continues to weaken.

"For now, we are still working off of a strong dollar, import prices are low and demand is low," he said.

But he said there is usually a one-year lag between movement in currency values and movement in import prices, which could increase next year if the dollar continues to weaken. Kalish doesn’t expect prices of apparel imports from China, Latin America or Eastern Europe to increase, but he does expect import prices from Southeast Asia and most developed countries to begin to rise.

In the overall economy, the sharp drop in apparel prices countered rising food, energy and medical care costs in the consumer price rate, which rose just 0.1 percent in July on the heels of the same increase in June.In the individual apparel price categories tracked by Labor, all sectors posted declines once again. Prices for suits and separates fell 6.7 percent in July and 4.8 percent against July 2001, while prices for dresses fell 0.7 percent last month but plunged 11.3 percent against a year ago.

Outerwear prices fell 1.3 percent in July versus June and fell further by 8.2 percent against July 2001. Prices for underwear, nightwear, sportswear and accessories fell 3.4 percent in July and plummeted 7.1 percent against a year ago.

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