By  on January 19, 2006

WASHINGTON — U.S. apparel retail prices, influenced by fierce competition and an influx of cheap imports, fell for the eighth consecutive year in 2005, to 1.1 percent below 2004 levels.

Prices in December dropped 0.3 percent compared with the previous month, the Labor Department reported Wednesday in its Consumer Price Index. Retail prices for women's apparel decreased 0.5 percent on a seasonally adjusted basis in December, which was 0.1 percent above year-ago levels.

"This industry has been in a batting slump and we're not just talking a month, we are talking eight long seasons," said Ken Goldstein, an economist at the Conference Board.

From 1998 through 2004, apparel retail prices fell each 12-month period as follows: 0.7 percent, 0.5 percent, 1.8 percent, 3.2 percent, 1.8 percent, 2.1 percent and 0.2 percent.

Goldstein said part of the reason "why we've got anyone still selling clothes in the U.S. is companies have moved offshore to cut costs."

He added that heavy discounting at retail has trained consumers to wait for deals and forego buying full-price items. However, there are still niches of strong pricing power.

"There are items that are hot: a $300 to $400 handbag is hot and a $40 handbag is not, and a $150 pair of jeans is hot, while a $40 pair of jeans is not," Goldstein said.

In the broader economy, declining energy prices led to a 0.1 percent drop in the price of all consumer goods and services last month. However, soaring energy prices throughout the year led to a 3.4 percent increase in the cost of all goods and services for the 12 months ended Dec. 31, the largest annual gain since 2000. Stripping out volatile energy and food prices, the core inflation rate, a closely watched measure of inflation, rose 2.2 percent for the year.

"The story is one of rising energy prices for the year," said Carl Steidtmann, chief economist at Deloitte Research. "We had sharp increases in energy prices and that contributed to most of the acceleration in inflation, and energy prices are still well above where they were a year ago."

Steidtmann said high energy prices are a factor contributing to a decline in real wages."It certainly has a very negative impact on consumer purchasing power," he said. "Very clearly, you are seeing a shift in income having to go to energy costs and not just gasoline."

The steepest price decreases in women's apparel for December came in the category that includes underwear, nightwear, sportswear and accessories, which fell 1.3 percent and were 0.4 percent below year-ago levels. Outerwear dipped 0.7 percent and was 4.1 percent less than year-ago levels. Suits and separates prices declined 0.5 percent in December and for the year. Retail prices for dresses bucked the trend, rising 2 percent in December and 7.6 percent compared with last year.

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