By  on March 19, 2007

WASHINGTON — Retail prices on women's apparel increased a seasonally adjusted 0.8 percent last month compared with January and were up 5.2 percent from a year earlier.

Dress prices slid 1.5 percent in February, but prices were up 10.3 percent against a year ago in the hot-selling category, according to the Labor Department Consumer Price Index released Friday. Suit and separate prices inched up 2.5 percent for the month and were ahead 8.9 percent versus a year ago.

Women's apparel prices are still down 2.2 percent compared with five years ago, held down by low-cost imports and stiff competition among stores, which have grown larger though consolidation.

Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University, attributed part of the monthly price increase to the weakness of the U.S. dollar, which has generally made imports more expensive.

The steeper women's apparel prices are feeding into larger economic trends that might ultimately make consumers less likely to spend.

Increases in the fuel, food and medical areas helped push up prices on all goods and services a greater-than-anticipated 0.4 percent, after a 0.2 percent boost in January, making it less likely the Federal Reserve Board will cut interest rates soon, economists said.

So-called core prices, which exclude the volatile food and energy sectors, advanced 0.2 percent in February, after a 0.3 percent rise the preceding month.

Some investors were hoping that the Fed, led by chairman Ben Bernanke, would lower interest rates to spur economic growth, though economists said that seems less likely now with the threat of inflation. For some, the declining housing market is a bigger threat to consumer spending.

"Down the road, we are worried that when homeowners cannot borrow easily or they cannot get a favorable rate or the banks become tighter on the home equity loan…that's when the trouble comes in on the consumer spending, which effects the apparel industry," Dhawan said.

The stock market plunged last week after the Mortgage Bankers Association released a report showing more homeowners are having trouble making their payments.

"Those poor people with the adjustable rate mortgages are the ones who are really getting squeezed right now," said David Wyss, Standard & Poor's chief economist.

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