WASHINGTON — Retail apparel prices edged up slightly in April, following two months of declines, as retailers appeared to absorb some of the costs from soaring cotton prices and held back on pushing them through to consumers.
Retail apparel prices rose 0.2 percent in April compared with March, with women’s wear increasing 0.1 percent and men’s wear falling 0.1 percent, the Labor Department said in its Consumer Price Index on Friday. Year-over-year comparisons showed apparel prices were up just 0.1 percent, as women’s fell 0.7 percent and men’s dropped 1.2 percent. Higher jewelry and boys’ apparel prices, which were up 8.5 percent and 4.2 percent year-over-year, respectively, offset the price declines in the women’s and men’s apparel categories.
“Retailers are in a squeeze right now — from the cost side and the pricing side,” said John Lonski, chief economist at Moody’s Capital Markets Group. “I think they would love to hike prices and have price hikes stick and that may be true for retailers selling products in demand or selling to upper-income clientele, but the pricing environment faced by mass marketing retailers such as Wal-Mart and Target is far different. They don’t have any pricing power. They could raise prices but consumers simply won’t buy.”
Lonski said a key indicator to watch is the 10-year treasury bond yield, which has declined from 3.58 percent in mid-February, when energy prices first began to surge, to 3.15 percent early Friday afternoon.
“If the treasury bond market or credit market believed consumers could absorb higher prices, the treasury bond yield would have risen above 3.58 percent but the fact that it is moving lower tells us the opposite,” Lonski said. “The credit market believes consumers do not have the wherewithal to absorb the latest jump in the CPI and thus the real economy and consumer spending will be lower than was otherwise expected.”
Prices for all goods and services rose 0.4 percent in April, as rising food and fuel prices continued to squeeze consumers’ discretionary income. The core index, excluding volatile food and energy prices, rose 0.2 percent, which is considered a tame level of inflation by economists.
“Higher food prices are being passed through to the consumer; inflation elsewhere is not dead but is still subdued,” said Nigel Gault, chief U.S. economist at IHS Global Insight. “Rising prices are squeezing consumer pocketbooks and will restrain growth in consumer spending volumes, which has slipped back to 2.5 percent to 2.75 percent in the first half of the year from 4 percent in the fourth quarter.”
The only category in women’s apparel prices that increased in April was suits and separates, which rose 0.7 percent against March. Outwear prices fell 0.9 percent and dresses fell 1.9 percent.
In men’s apparel, the two price categories that increased were offset by declines in other categories. Prices for men’s pants and shorts fell 0.8 percent and prices for prices for furnishings declined 0.1 percent. Prices for suits, sport coats and outerwear rose 1.5 percent last month, while prices for shirts and sweaters rose 0.3 percent.