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Gov’t Reports Small Producer Price Gains for May

Drop in cotton prices eases upward pressure on U.S.-made apparel and fabrics.

WASHINGTON — Wholesale apparel and textile prices edged up slightly in May but at a moderate pace, as soaring cotton prices continued to weaken, the Labor Department’s Producer Price Index showed Tuesday.
Most U.S.-made apparel and textile price categories saw minimal price gains, although many categories posted substantial price increases in year-over-year comparisons.

 

Wholesale prices for domestically produced apparel rose 0.2 percent in May compared with April and were up 2.4 percent against a year earlier. Prices for women’s apparel rose 0.3 percent last month and were 1.5 percent above the year-earlier level, while prices for men’s apparel rose 0.1 percent in May and were 2.4 percent higher than in May 2010.

 

The overall PPI rose 0.2 percent in May, primarily due to higher energy prices.
“We did see a drop again in raw cotton prices of around 24 percent in May,” said Gregory Daco, principal U.S. economist at IHS Global Insight.

 

Spot prices for cotton fell to $1.65 a pound as of Tuesday from $2.16 a pound in April.
“That should alleviate some of the pressure on domestically produced goods and imported goods,” Daco said.

 

Daco also noted a 25 percent drop in raw cotton prices does not directly translate into a 25 percent drop in wholesale textile prices, as U.S. fabric mills are still trying to recoup some of their losses from record high cotton prices of the past year and are maintaining slight prices increases.

 

The PPI for apparel is not considered an important indicator, since the vast majority of clothes sold at retail are imported. The Consumer Price Index, which measures all goods, is looked at by economists as the key read of clothing prices.

 

Textile mill apparel fabric prices rose 2.7 percent last month and were 14.2 percent higher than a year earlier, driven in large part by high cotton prices, which are continuing to soften and fell from $1.80 a pound to about $1.60 in early May. Domestically produced yarns rose 1.6 percent in May and were 28.4 percent higher than May 2010. Within the yarn category, U.S.-made prices for combed cotton yarns rose 1.9 percent last month and were up dramatically, by 88.3 percent compared with a year earlier, while prices for carded cotton yarn edged up 0.6 percent in May and were 78.3 percent higher than in May 2010. Prices for domestically produced greige fabrics rose 3.3 percent last month and were up 13.2 percent over year-earlier levels. Prices for U.S.-made knit fabrics rose 0.1 percent in May and were 11.9 percent higher than a year earlier.