By  on June 18, 2007

WASHINGTON — Women's apparel prices slid a seasonally adjusted 0.4 percent in May, compared with the preceding month, bucking the broader, gasoline-induced trend that saw prices on all goods shoot up 0.7 percent after a 0.4 percent rise in April.

Excluding the volatile food and energy sectors, the so-called "core" prices inched up just 0.1 percent in May, below economists' predictions of 0.2 percent, and April's increase of 0.2 percent.

"The headline was very high because of the energy, but the core has been moderating," said Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University. "That is good news if you're looking toward a rate cut."

The Federal Reserve could lower its benchmark federal funds interest rate from the current 5.25 percent, making it cheaper to borrow money, if the economy seems to need a boost. That would hearten many investors, though it wouldn't necessarily be good news since only a weakened economy would need the extra support.

Consumers, whose spending accounts for two-thirds of the economy, play a leading role in the economic game, but it is uncertain how robustly they will continue to spend. Though there has been some impact, especially at lower-priced stores, consumers seem to be holding up rather well under gasoline prices that rest near their all-time highs.

Sales at all retail and food service businesses were unexpectedly strong in May with a 1.4 percent rise, the largest increase in 16 months, according to a Commerce Department report last week.

"The random card here is — how will the housing slowdown play into consumer spending, especially in states like Florida and California?" said Dhawan.

Whatever is happening with the overall numbers, in apparel, price deflation has been the trend for some time.

Against a year earlier, May prices on women's apparel were down 0.2 percent, according to the Labor Department's Consumer Price Index, released Friday. Competition among retailers and increased imports from low-cost countries such as China have worked together to help push prices on women's fashions down 2.8 percent over the past five years.

Specifically, prices on suits and separates fell 0.1 percent in May, versus April, but were up 1.8 percent from a year earlier, as dress prices dropped 2 percent for the month and were off 5.8 percent from May 2006.

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