By  on September 20, 2006

WASHINGTON — Wholesale prices on U.S.-made women's and girls' apparel rose a seasonally adjusted 0.5 percent in August and were 0.4 percent ahead of a year earlier, according to the Labor Department's Producer Price Index.

The monthly report, released Tuesday, also offered evidence a slowing economy has helped keep inflation in check. Prices on all domestically made goods inched up 0.1 percent last month, following an identical rise in July and a jump of 0.5 percent in June.

After stripping away volatile food and energy goods, the so-called "core" prices slid 0.4 percent for the month, after a 0.3 percent decline in July and a 0.2 percent rise in June.

Many economists expect the Federal Reserve Board's Open Market Committee to keep the benchmark federal funds interest rate at 5.25 percent when it meets today. The committee ended a two-year string of 17 consecutive interest rate hikes last month and said it would wait to see where the economic indicators pointed before making further changes.

"Signs of a slowing economy, coupled with anchored inflation expectations, led the Fed to suspend its two-year credit tightening campaign in August," Kenneth Beauchemin, Global Insight U.S. economist, said in a report. "Back-to-back monthly declines in the core PPI, coupled with two consecutive monthly consumer core inflation readings of 0.2 percent, vindicates that decision. The likelihood of further rate hikes this year is falling."

There were also new signs of the cooling housing market, as housing starts dropped 6 percent in August to an annual rate of 1.7 million, the Commerce Department reported Tuesday.

The drop in core inflation and a slowdown in housing starts make it more likely the Fed's next move will be to reduce interest rates, said John Lonski, team managing director of Moody's Investors Service economic group, in a report.

"Fears of core price inflation have now been supplanted by worry over home price deflation," said Lonski.

Within the women's and girl's category in August, woven shirts saw prices increase 2.1 percent against a year earlier, as jeans and slacks prices were 0.9 percent more and underwear was up 0.7 percent. Nightwear saw a 4.2 percent decrease. In the textiles area, prices on synthetic fibers rose 1.7 percent in August, as yarns were up 2.7 percent and greige fabric prices increased 5 percent.

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