Retail Sales Report Signals Tame Inflation

Rising food costs drove prices up on consumer goods, but women's retail apparel prices were flat in April compared with the previous month and dropped 4.3...

WASHINGTON — Rising food costs drove prices up on consumer goods, but women’s retail apparel prices were flat in April compared with the previous month and dropped 4.3 percent versus a year ago, the Labor Department reported Wednesday in its Consumer Price Index.

This story first appeared in the May 15, 2008 issue of WWD.  Subscribe Today.

Women’s apparel prices declined in March by 2.7 percent and in February by 1.8 percent. January was the last month that showed an increase in retail prices in the product category.

Apparel costs overall crept up 0.5 percent compared with the previous month, but dropped 0.7 percent compared with April 2007. Men’s apparel prices increased 0.9 percent for the month and 0.8 percent compared with a year ago. Girls’ apparel prices increased 0.1 percent on a monthly basis, but dropped 8.7 percent versus April 2007.

Spikes in food costs drove retail prices up 0.2 percent overall after rising 0.2 percent in March. Prices were flat in February and up 0.3 percent in January. March consumer prices just missed consensus estimates of a 0.3 percent increase for the month.

Core prices, excluding the unpredictable food and energy sectors, increased 0.1 percent compared with the previous month and 2.3 percent versus a year ago. Food prices continued to rise in April, but energy costs showed a lull in the increases of the last few months. Sources said the flat energy prices reported in April were temporary, however.

Prices for suits and separates, the most heavily weighted women’s apparel category, fell in both monthly and year-over-year comparisons. The category dropped 1.4 percent versus the previous month and 6.2 percent from the prior year. Underwear, nightwear, sportswear and accessories prices were flat compared with the previous month and fell compared with April 2007.

Suits and separates prices were impacted by discounting, said Malinda Harrell, an economist with the U.S. Bureau of Labor Statistics. The results were typical for April, when prices often fluctuate based on discounting and when the Easter holiday falls, Harrell said.

The flat prices for apparel reflect correction of the decline in prices reported for March, said Charles McMillion, president and chief economist for MBG Information Services.

“Prices were cut so sharply in March they show up as a bounce back in April,” McMillion said.

The slight downtick in the core rate for April was a “pleasant surprise” and should help alleviate some of the concern about the outlook for inflation, said Kenneth Beauchemin, U.S. economist for Global Insight.

“Nevertheless, plenty of risk remains. The remarkable consistency of the ‘across the board’ increases in food prices emanates from a number of sources, including the soaring energy prices of recent months. To what extent, and when, the energy price onslaught embeds itself into core consumer prices, is an open question,” Beauchemin said.