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Imports, Competition Drive Apparel Prices Down 0.9%

Low-cost imports and intense competition between stores helped drive retail prices on women's apparel down 0.9 percent in 2007 as increases in energy costs...

WASHINGTON — Low-cost imports and intense competition between stores helped drive retail prices on women’s apparel down 0.9 percent in 2007 as increases in energy costs pushed prices on all goods and services up 4.1 percent, well above the 2.5 percent rise in 2006 and the largest jump in 17 years.

Excluding the volatile food and energy sectors, overall retail prices jumped 2.4 percent last year, the Labor Department reported Wednesday in its Consumer Price Index.

Inflation, however, is not as much a concern for economists and federal regulators as pressures on economic expansion, including weakness in job growth and consumer spending and a credit crunch on Wall Street.

Although increased prices strain shoppers, particularly on the lowest rungs of the economic ladder, it was not higher prices that made for a weak holiday season, said Paul Nolte, director of investments at Hinsdale Associates. Total retail sales fell a seasonally adjusted 0.4 percent in December, compared with the preceding month, the Commerce Department reported this week.

Outside of the energy and food areas, where prices last year rose 17.4 percent and 4.9 percent, respectively, Nolte said inflation wasn’t much of a concern.

Within the women’s category, suits and separate prices fell 0.3 percent last year and outerwear prices dipped 4.9 percent. But dresses bucked the trend with a 2.7 percent rise.

Comparing December with November, women’s apparel prices rose a seasonally adjusted 0.8 percent. Consumer prices across the economy were up 0.3 percent in December, after a 0.8 percent jump in November and a 0.3 percent increase in October.

The Federal Reserve Board keeps a close watch on inflation and will hike interest rates to keep it in check. But with the economy slowing, economists expect the central bank to continue to cut its benchmark federal funds interest rate, which stands at 4.25 percent.

The Fed, chaired by Ben Bernanke, meets next on Jan. 29 and 30. In addition to poring over inflation, gross domestic product estimates and other data, it will consider the results of the Beige Book, an anecdotal reading of the economy across the Fed’s 12 districts that was also released on Tuesday.

Drawing on information collected from mid-November through early January, the Beige Book reported that economic activity increased modestly though at a slower pace than earlier in the year.

In the Philadelphia district, apparel sales fell short of stores’ expectations, especially at specialty operations, where the season was “a real disappointment,” according to several of the Fed’s contacts.

In the Richmond district, a North Carolina department store manager said extended store hours just before Christmas had little impact on sales. Retail wages in the district grew faster in December, even as jobs were cut.

“A department store executive in Maryland said that regular employees’ hours had been ‘cut to the minimum level allowed for employee benefits,’ while a store manager in Virginia Beach, Va., noted that ‘hours have been cut to the bone,'” said the report.

In the San Francisco district, retail sales were flat to down, and the Fed’s contacts said there was early and aggressive price discounting, especially for apparel.