WASHINGTON — Economists aren’t sure how low apparel retail prices can go, but many claim they haven’t bottomed out.

This story first appeared in the June 19, 2002 issue of WWD. Subscribe Today.

Retail prices for all apparel dropped a seasonally adjusted 0.6 percent last month against April and further fell by 2.1 percent compared with May 2001, the Labor Department reported Tuesday in its Consumer Price Index.

Women’s apparel prices followed a similar pattern and fell a seasonally adjusted 1.1 percent in May versus April and by 2.5 percent against the year-ago period. Girls’ prices rose 1.4 for the month, but were down 1.3 compared with May 2001.

“The margins have been pounded down in the retail industry and that reflects the growing sourcing of apparel overseas,” said John Mothersole, senior economist and principle at the WEFA Group. He said determining when relative stability will return to apparel retail prices is “an open question.”

“We are making the adjustment from a high-cost manufacturing base to a low-cost manufacturing base, and after the transition is done, we will see how much lower can prices go,” he said.

A Labor analyst, who spoke on condition of anonymity, said there was nothing “unusual” about these results. She said, “The declines reflected traditional spring and summer sales.”

The analyst attributed the price declines to increases in low-cost imports and fierce price competition between department stores and discounters. The CPI is viewed as a gauge of inflation. All retail prices remained unchanged in May and were up 1.2 percent against May 2001.

“If you look at things in the aggregate sense, you can start to conclude we are in a no-inflation environment,” Mothersole said.

The overall core rate, which excludes the highly volatile energy and food prices, has remained stable on a year-over-year basis, he noted.

“I am encouraged by these numbers,” said Mothersole. “We expected softness in this report and that’s what we got, but there are signs of stability.”

Mothersole also noted that there is a great amount of capacity at retail in terms of square footage. He said, “That competition suggests strongly that pricing will remain very competitive for the next year or two.”

In the individual categories tracked by labor, women’s dress prices proved to be the only sector with a slight rebound, due mainly to a low base level, according to the Labor analyst.

Women’s dress retail prices fell slightly in May by 0.5 percent but rose 10.3 percent against May 2001.

“We are seeing a recovery in dress prices, but only because there was a 10 percent year-over-year decline in these prices in 2000,” she said.

Prices for outerwear fell 4 percent in May and further fell by 6.2 percent against the year-ago level, while prices on suits and separates fell 1.9 percent last month and 4.1 percent year-over-year. Retail prices for women’s underwear, nightwear, sportswear and accessories fell a combined 1.8 percent in May and 4.4 percent against May 2001.”

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