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Apparel Prices Gain But Deflation Persists

Retail apparel prices rose in June for the first time in nine months, even as retailers continued to discount heavily to clear inventories.

WASHINGTON — Retail apparel prices rose in June for the first time in nine months, even as retailers continued to discount heavily to clear inventories, the Labor Department’s Consumer Price Index revealed Wednesday.

Retail prices for all apparel rose a seasonally adjusted 0.4 percent in June against May, but were still down 2.4 percent against June 2002, continuing a long-term deflationary slide.

Women’s apparel prices at retail rose 0.7 percent in June after falling 0.3 percent in May. Compared with June 2002, retail prices for women’s fell 3.7 percent.

Economists offered different views on the month-to-month increase. Some chalked them up to seasonal anomalies, while others claimed retailers pulled back on price reductions.

“Merchandise has been on sale for so long that discounts were not as deep as they have been,” said a Labor apparel analyst. “Our sample shows retailers had more sales than ever in June, but that actual discounts were lower than average.”

Charles McMillion, chief economist at MBG Information Services, said, “As it has for the past decade, apparel prices remain the only major component of the…consumer prices market basket suffering from deflationary pressures due to a flood of cutthroat-priced imports — increasingly from China — and weakening demand growth.”

John Mothersole, senior economist at Global Insight, said, “The shelves were relatively not overstocked and prices were not cut as much as they normally are this time. It also may just be an anomaly in the CPI in how prices are picked, so it will take another couple of months to tell.”

Prices for all retail goods in June were up 0.2 percent, but the core index, stripped of energy and food prices, was flat.

But he said he is optimistic that several factors will boost consumer spending, including low interest rates and mortgage refinancing, incentives for auto purchases and tax cuts.

Among the categories of women’s apparel tracked by the government, retail prices for dresses rose 3 percent in June, but fell 3.2 percent against June 2002, while prices for outerwear rose 0.6 percent in June, but fell 3.8 percent against a year ago.

Consumer prices for suits and separates remained flat, but fell 4.8 percent year over year. Prices for underwear, nightwear, sportswear and accessories rose 0.6 percent in June, but fell 1.7 percent against June 2002.

This story first appeared in the July 17, 2003 issue of WWD.  Subscribe Today.