By  on February 21, 2008

An inflationary pattern is developing in women's retail apparel prices.

For the third straight month, retail prices for women's apparel rose a seasonally adjusted 0.6 percent in January, following a 0.5 percent rise in December and a 0.6 percent bump in November. This follows a long-term deflationary cycle for the sector.

Against a year ago, however, prices on women's apparel were still down 1.4 percent, according to the Labor Department's Consumer Price Index released Wednesday.

Within the women's category, outerwear prices rose 4.9 percent during January and were 4.2 percent ahead of a year earlier, as suit and separates increased 0.5 percent for the month and fell 1 percent for the 12-month period.

In general, apparel retailers last month did not discount fall and winter merchandise as much as they usually do and were able to boost prices on goods they sell all year long, said Jessica Penvose, an economist at the Bureau of Labor Statistics.

Looking at the overall retail landscape, Penvose said stores are more hesitant.

"They're not buying as much and they're not buying as many out-there kinds of things, trendy and really fashionable," she said. "They're trying to stick with staples that they know will sell."

The recent increase in apparel prices may also be a distant ripple of the inflation in the Chinese economy, where costs are on the rise and tougher labor laws have been put in place.

Still in the midst of a growth spurt, China, which accounts for 34.4 percent of U.S. apparel imports, saw its CPI jump 7.1 percent last month versus a year earlier, the biggest gain in more than 11 years.

"We are seeing Chinese inflation bleed into the U.S. marketplace," said Peter Morici, professor at the University of Maryland's Robert H. Smith School of Business. "There's going to be some upward [price] pressure on apparel coming out of China."

The January rise in apparel was joined by higher prices in other sectors, from transportation and medical care to education and communications, that combined to drive price tags on all goods and services up 0.4 percent, after a 0.4 percent rise December and 0.9 percent jump in November.The so-called core prices, which exclude the volatile food and energy areas, rose 0.3 percent, an acceleration following nine straight months of 0.2 percent increases.

Although data from just one month are prone to statistical anomalies, the higher-than-anticipated rise in core prices might be enough to take some steam out of any future Federal Reserve Board cuts in interest rates.

"The Fed will not so easily dismiss the January acceleration," Global Insight U.S. economist Kenneth Beauchemin wrote in an analysis. "The broadly based nature of the acceleration within the composition of the core index sharpens the signal and suggests a true inflationary process as opposed to an unlucky combination of a few large price increases."

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