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Apparel Prices Fall, as Energy Surges

Retail prices for apparel continued to fall in February, even though overall consumer prices rose sharply as energy prices surged.

WASHINGTON — Retail prices for apparel continued to fall in February, even though overall consumer prices rose sharply as war with Iraq inched closer and energy prices surged, according to the Labor Department’s Consumer Price Index.

Retail prices for all apparel fell 0.2 percent last month, on the heels of a record decline of 0.9 percent in January. Over the last 12 months, retail prices for apparel fell 2.3 percent.

Women’s apparel retail prices gained slightly in February on a seasonally adjusted basis by 0.4 percent, but fell by 2.4 percent for the year ending Feb. 28. Girls’ retail apparel prices fell 1.8 percent last month and plunged 3.1 percent over the last 12 months.

“The combination of import competition, global overcapacity and weakened demand is forcing everybody up and down the [apparel] supply chain to slash prices,” said Charles W. McMillion, chief economist at MBG Information Services. “This is an unprecedented level of price cutting.”

McMillion noted that deflation continues eight years of declines that have now driven nominal prices back to levels of January 1990. He also said war with Iraq could lead to further reductions in capacity, jobs and prices.

“There is so little demand and purchasing of apparel, and retail sales are miserable, as well,” said Michael Donnelly, senior economist at Global Insight. “It’s a vicious cycle in the apparel world. When you add up falling sales and falling prices, it’s no wonder people are being laid off.”

In the overall economy, consumer prices rose 0.6 percent last month on surges of 5.9 percent in energy prices and 0.7 percent in food prices. The core CPI index, excluding food and energy prices, inched up just 0.1 percent in February. Overall consumer prices have risen strongly by 3 percent over the last 12 months due primarily to rising energy costs.

“If a percentage of your income is going to gas and heat and all of the other associated variables, that leaves less money for other items,” said Donnelly. “One of the first places people cut back is apparel because it can be easily cut out of a consumer’s budget.”

This story first appeared in the March 24, 2003 issue of WWD.  Subscribe Today.

In the individual categories tracked by Labor, retail prices for outerwear rose a healthy 2.6 percent in February and gained 1.2 percent over the last 12 months, while prices for suits and separates inched up 0.3 percent in February, but plunged 3.1 percent for the year ending Feb. 28.

Prices for dresses gained 0.2 percent last month and rose 1.4 percent over the last year, while prices for underwear, nightwear, sportswear and accessories remained flat last month and plunged 4 percent over the last 12 months.