By  on December 18, 2011

WASHINGTON — Retailers took a gamble on their pricing power in November, pushing retail apparel prices up a seasonally adjusted 0.6 percent even as the crucial holiday shopping season began.

The picture was even more stark in year-over-year comparisons, with apparel prices rising 4.8 percent from November 2010, the U.S. Labor Department’s Consumer Price Index showed. It was the largest November-to-November increase in apparel prices since 1987, when they rose 6.3 percent, according to Sarah Hutchinson, an economist with the Labor Department.

Men’s apparel prices showed the most inflationary pressure for the month, increasing 1.3 percent in November and 5.9 percent compared with a year earlier. Women’s apparel prices advanced 0.7 percent in November compared with October and were 4.4 percent above November 2010.

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Within the men’s category, apparel prices for shirts and sweaters, and furnishings rose 1.1 percent in the month. Prices for furnishings were 8.2 percent higher year-to-year, while prices on shirts and sweaters were 7.3 percent more for the same period.

In women’s, prices on suits and separates rose 1 percent last month and were 3.5 percent higher than in November 2010. Prices on outerwear increased 0.5 percent for the month and 5.1 percent for the year, while prices on nightwear, sportswear and accessories were up 0.4 percent last month and 6.4 percent compared to a year earlier.

Boys’ apparel prices rose 0.8 percent in the month and 7.8 percent for the year, while girls’ apparel prices gained 2.4 percent monthly and 10.2 percent yearly.

“I’m surprised,” said John Lonski, chief economist at Moody’s Capital Markets Group. “It really runs counter to the many reports of aggressive price discounting serving as a major spur behind the strong start to the holiday shopping season.”

Lonski said higher cotton prices earlier in the year were a factor in retailers’ stronger pricing strategies, but he questioned whether the pricing power could be sustained in December.

“It’s a gamble for retailers because not only are prices running higher than average wage growth but you are also finding that [consumers’] wealth is being diminished by the decline in equity prices and home price deflation,” Lonski said. “My sense is that given the fact we had two strong months [of apparel price increases] — 0.4 percent in October and 0.6 percent in November — and given the anecdotal evidence for the need to discount prices and evidence of slow holiday sales after the Thanksgiving weekend, chances are there is going to be a negative sign in front of the December percentage change in the apparel price component of the CPI.”

Paul Edelstein, director of financial economics at IHS Global Insight, said import price inflation, particularly stemming from higher labor costs in China, contributed to the higher retail apparel prices. Edelstein said on an annual basis apparel import manufacturing prices are up 9 percent. He also attributed some of the higher apparel prices at retail to the surge in cotton prices earlier in the year, when cotton rose above $2 a pound in the spring before diving back down to less than $1 this fall.

“I think that retailers are going to try to pass costs on to consumers and try to see how much they can get away with,” Edelstein said. “They don’t want to experience a collapse in margins, which will affect earnings and share prices, and they have to be cognizant that they have a very cost-conscious consumer, so it is a balancing act.”

The overall Consumer Price Index was flat last month, but prices were 3.4 percent higher than November 2010. Core retail prices, excluding volatile food and energy prices, rose 0.2 percent in November compared with October.

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