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High Imports, Low Demand

WASHINGTON — Increases in imports and production, coupled with weakening demand and fierce competition from discounters, has undermined pricing power, according to economists.<br><br>Retail prices for all apparel fell a seasonally adjusted 0.9...

WASHINGTON — Increases in imports and production, coupled with weakening demand and fierce competition from discounters, has undermined pricing power, according to economists.

Retail prices for all apparel fell a seasonally adjusted 0.9 percent in June, while prices fell 2.9 percent against June 2001. The one-month decline marked the biggest decline in June since 1948, the Labor Department’s Consumer Price Index revealed on Friday.

Women’s apparel retail prices fell 0.3 percent in June versus May, and fell 3.1 percent against the year-ago period. Girls’ prices dropped 3.5 percent for the month and fell further by 1.1 percent against June 2001.

It was the biggest [year-over-year] decrease since June 1996 for women’s prices, according to a Labor analyst who spoke on the condition of anonymity.

“A large part of our sample is full-price department stores, and they have had a lot of competition from discounters,” she said. “They are clearing out merchandise now to get ready for back-to-school and early fall.”

Charles McMillion, chief economist at MBG Information Services, said prices have been in a “free fall” for the past three months, which he expects to continue through the year.

“These kinds of price drops can’t be sustained,” McMillion said. “If they can’t do anything about imports and demand, the only other alternative is to cut domestic production, and it is liable to fall sharply over the next few months.”

The overall consumer price rate, which includes the volatile energy and food prices, rose 0.1 percent in June and increased 1.1 percent against June 2001.

“The problem is we are already in a jobless recovery, and it isn’t going to get better for the textile and apparel industries,” predicted McMillion.

In the individual price categories tracked by Labor, all sectors posted declines. Prices for suits and separates fell 4.4 percent in June and 4.3 percent against the year-ago level, while prices for underwear, nightwear, sportswear and accessories fell 3.5 percent last month and plunged 5.7 percent against June 2001.

Prices for dresses fell 1.4 percent in June, but rose 8.8 percent on a year-over-year basis. Outerwear prices fell 1.1 percent last month and dipped 5.5 percent against the year-ago period.

This story first appeared in the July 22, 2002 issue of WWD.  Subscribe Today.