By  on May 16, 2007

WASHINGTON — Retail prices on women's apparel fell a seasonally adjusted 0.5 percent in April compared with the previous month, but were 0.3 percent higher than a year ago.

Costs for all goods increased 0.4 percent after rising 0.6 percent in March, suggesting to some experts that inflation is slowing despite higher energy prices. Excluding the food and energy sectors, the so-called core rate of inflation rose 0.2 percent compared with 0.1 percent in March, 0.2 percent in February and 0.3 percent in January.

"On average in the economy, yes, there is a bit of a pinch from the food and the oil prices," said Rajeev Dhawan, director of the economic forecasting center at Georgia State University. "But what really matters is what's happening to the other 80 percent of the economy, the core."

Prices for all apparel fell 0.3 percent last month and increased 0.3 percent from a year earlier, according to the Consumer Price Index released Tuesday by the Labor Department. The drop in apparel prices and economic growth that slowed to 1.3 percent in the first quarter, based on advance estimates of the gross domestic product released last month by the Commerce Department, helped keep prices across the economy down.

The inflation data triggered a rally on Wall Street with the Dow Jones Industrial Average rising 37.06 points, or 0.3 percent, to close at an all-time high of 13,383.84.

Retailers turned in poor sales for April, blaming the weakness on bad weather and an early Easter. The slowdown in the housing sector is spreading to the rest of the economy and restraining prices, Dhawan said.

"Consumer spending will suffer going forward, especially from the housing slowdown," Dhawan said, predicting that the Federal Reserve Board will likely lower interest rates this summer.

The Fed keeps a close eye on inflation and if prices rise too quickly, regulators could increase the benchmark federal funds rate, now 5.25 percent, to keep it in check. If economic growth slows too much, the Fed will likely lower rates, making it cheaper to borrow money and stimulating growth.

Economists are split on what will happen to interest rates, though."There's evidence [in the CPI report] that the inflation pressure is not winding down," said Ken Goldstein, economist at the Conference Board, pointing to price increases for Internet services, for instance.

Businesses are going to want to pass along higher labor costs to consumers in the form of higher prices, he said.

"What we can see today is suggestive of an economy that's rising by more than 2 percent in the second quarter," Goldstein added.

After two quarters of drag, the negative impact of the housing market on the economy might be lessoning, he said.

Driving the decrease in women's apparel were suits and separates prices, which declined 1.7 percent for the month and were off 0.6 percent from a year earlier. On the other side of the ledger, the combined category of women's underwear, nightwear, activewear and accessories registered a 1.9 percent bump in prices for the month and were up 3.6 percent from April 2006.

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