WASHINGTON — Retail prices for women’s apparel slid a seasonally adjusted 1.3 percent last month and were 2.5 percent below year-ago levels, according to the Labor Department’s Consumer Price Index, released Thursday.

In the broader economy, inflation remained in check as prices on all goods and services increased 0.1 percent. Fac­toring out the food and energy sectors, what is known as core inflation advanced just 0.1 percent.

The Federal Reserve closely watches inflation and generally raises interest rates to cool off the economy if prices get too high. Although economists expect the Fed to continue to raise the federal funds rate, which stands at 4.5 percent, the hikes might be near an end.

Global Insight’s chief economist, Nariman Behravesh, expects to see two more rate increases of a quarter-point each, leaving the federal funds rate at 5 percent.

“Bottom line, this is good news because it means inflation’s under control and the Fed doesn’t need to panic,” said Behravesh.

Despite a broadly positive economic picture with good job growth, he said consumers might be tightening up some.

“It’s a bit of a mixed bag because we’re definitely seeing a slowing in housing and slower growth, I suspect, in consumer spending,” he said.

As overall prices have inched up, however, apparel prices have been on a downward slope.

“Import prices are going to pull down overall apparel prices, and it’s a function of intense competition in this area from low-cost producers,” he said, pointing to countries such as China and India.

Within the women’s category, outerwear prices dipped 2.5 percent in Febru­ary and were 7.3 percent below a year ago, while dress prices rose 2.6 percent for the month and 8.4 percent from a year earlier.

Richard Yamarone, chief economist at Argus Research Corp., said, “We’re not out of the woods yet.”

Yamarone pointed to several areas where prices are rising, such as education, private transportation and energy costs.

“Apparel makers will probably have to continue to lower their prices in order to attract consumers, whose purchasing powers may be slightly eroded,” he said.

This story first appeared in the March 17, 2006 issue of WWD. Subscribe Today.

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