By  on September 20, 2007

WASHINGTON — Following a long-term pattern, August retail prices for women's apparel fell a seasonally adjusted 0.4 percent compared with July, and were down 2.8 percent from a year earlier.

The decline contributed to a 0.1 percent dip in prices on all goods and services, the first drop since October, according to the Labor Department's Consumer Price Index released Wednesday. The so-called core prices, which exclude the volatile food and energy sectors, inched up 0.2 percent for the third month in a row.

The mild increase in the core prices reinforced the notion that it is not inflation that is the biggest threat to the economy, but things that could restrain growth, such as the downfall in the housing sector and the credit crunch.

Inflation is a "nonissue" right now, said Per Berglund, senior economist at Moody's Economy.com.

"The key probably right now is to handle the downturn in the housing market and the problems in the credit market," said Berglund. "The risks at this junction are definitely tilted to the downside."

Retailers, which have been struggling somewhat, might well continue to get pinched. "The negative wealth effects now from the housing crisis are going to put a damper on retail spending going forward," said Berglund.

Even as the economy has ebbed and flowed over recent years, apparel prices have generally declined, thanks to intense competition among brands and stores, technological advancements and the shift of production to low-cost countries. Women's apparel prices were down 5.7 percent over the last five years.

In August, prices on women's suits and separates fell 0.4 percent compared with July, and were down 3 percent from a year earlier, as dress prices slid 0.7 percent last month and were down 0.8 percent from August 2006.

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