WASHINGTON — Retail prices for apparel ended a four-month run of gains in July, falling 0.8 percent and marking a return to a long-term deflationary pattern, the Labor Department’s Consumer Price Index revealed Tuesday.

Compared with July 2003, apparel prices last month fell 0.3 percent. Retail prices for women’s apparel declined 1 percent in July against June after three consecutive months of increases, but were still 0.8 percent above July 2003.

“It was a little surprising the drop was as large as it was,” said Carl Steidtmann, chief economist at Deloitte Research. “July is generally a clearance month and you do get discounting, but there wasn’t that much to discount. So it’s kind of surprising, given how lean inventories were.”

Steidtmann said he expects apparel retail prices to continue to fall.

“The forces of deflation on apparel are still pretty strong and it is very likely we will continue to see prices slip a little bit,” he added.

Charles McMillion, president of MBG Information Services, attributed the drop in retail apparel prices to a slowdown in consumer demand.

“The large drop in July’s retail prices suggests the weakening consumer demand, and a continuing increase of low-cost imports are having their predicted effects,” McMillion said. “Apparel again is the only major component of the [Labor Department’s] inflation market basket with prices lower than last year.”

Retail prices as measured by the CPI are considered to be the government’s best gauge of inflation.

In the overall economy, consumer prices fell 0.1 percent in July, after a 0.3 percent gain in June and a 0.6 percent increase in May, which were a reflection of rising energy costs. Energy costs fell in July, however, which contributed to the overall evening out in retail prices.

“The economy still looks pretty good,” Steidtmann said. “There was a good housing number and industrial production bounced back. The key issue is whether energy prices stay where they are or we see them come down. If they come down, the economy will be in great shape.”

McMillion pointed out that apparel and textile production continued to fall, according to the Federal Reserve’s latest report on industrial production and capacity utilization released Tuesday. Seasonally adjusted output from U.S. apparel manufacturers was 1.1 percent weaker than previously estimated in June and declined another 1.7 percent in July. Textile output in June was also revised downward by 2.2 percent, but rose 1.2 percent in July.McMillion noted demand has grown 70 percent since the end of 1994, but apparel output has fallen 44.4 percent and textile output has dropped 25.7 percent, according to McMillion, which has been a major factor in the long-term deflationary pricing pattern for apparel.

“Demand has gone up over the last nine years and production has gone down,” he said. “That can only mean that the demand is being filled by imports and domestic production is very rapidly losing market share.”

Meanwhile, retail prices for women’s outerwear fell 0.2 percent in July and were down 2.8 percent against a year ago, while prices for dresses declined 1.3 percent last month and year over year. Suits and separates prices fell 1 percent in July, but rose 2.5 percent against a year ago, while prices for underwear, nightwear, sportswear and accessories dipped 0.5 percent last month and dropped 1.1 percent year over year.

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