By  on June 16, 2008

WASHINGTON — Driven largely by discounting, women's retail apparel prices eased in May, dropping a seasonally adjusted 0.5 percent from the prior month and falling 4.4 percent from a year ago.

Prices for all apparel, including girls', men's and boys', declined 0.3 percent compared with a month ago and 0.6 percent from the prior year.

Retail prices for all consumer goods increased in May, climbing 0.6 percent from April and 4.2 percent from last year, led by increased food and energy costs. Core prices, excluding the volatile food and energy sectors, grew 0.2 percent from the previous month and 2.3 percent versus last year.

The largest monthly drop in apparel was in the dress category, where prices fell 6.1 percent in May versus April. They increased, however, compared with last year, rising 1.9 percent. Women's outerwear prices decreased 1.8 percent on a month-to-month comparison and tumbled 8.5 percent from last year.

Girls' apparel prices increased 0.3 percent from April and suits and separates were 0.1 percent higher. However, compared with May 2007, girls' apparel prices fell 7.6 percent and suits and separates decreased 6 percent.

Women's underwear, nightwear, sportswear and accessories prices increased 0.4 percent in May from the prior month, but dropped 2.3 percent compared with last year.

"It's fairly clear that retailers don't have much pricing power," said Charles McMillion, president and chief economist of MBG Information Services. "Everybody is running into serious price resistance, so it is very difficult to pass price increases along."

Consumers, squeezed already by higher energy and food prices, are not tolerant of higher prices, he said.

"There were a lot more discounts than normal [in May] — more discounted items and steeper discounts on some items," said Malinda Harrell, an economist with the U.S. Bureau of Labor Statistics, adding that dresses in particular were heavily discounted.

When companies report quarterly profits there could be an impact on company margins if deep discounts have been driving retail sales and keeping apparel prices down, McMillion said.

Looking ahead, there is uncertainty over price trends as fuel costs continue to soar. Prices for all consumer goods and core prices both edged higher in May, and the industries directly impacted by fuel are already reporting price increases. Airline fares increased 3.2 percent in May, which drove the public transportation index up 2.3 percent. There is fear that price increases could creep into other sectors down the road. Airline prices can be seen as an early warning, said Kenneth Beauchemin, U.S. economist at Global Insight."Producers have thus far remained patient, observant of competitive pressures, while waiting for the tidal surge in energy prices to recede," Beauchemin said. " It is becoming clearer, however, that the waters will stubbornly remain and cause more firms to throw in the towel and raise

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