WASHINGTON — Consumers haven’t felt the pinch just yet.

This story first appeared in the April 18, 2011 issue of WWD. Subscribe Today.


Retail apparel prices fell in nearly every category in March, marking the second consecutive month of price declines, as retailers continued to refrain from passing on higher costs from soaring cotton prices through to consumers besieged by rising fuel and food prices.

Retail apparel prices were down 0.5 percent last month, with women’s wear falling 0.8 percent and men’s wear declining 0.3 percent, the Labor Department said in its Consumer Price Index. Year-over-year comparisons showed apparel prices were down 0.6 percent, as women’s fell 1.5 percent and men’s dropped 1.4 percent.

Prices for all goods and services rose 0.5 percent in March, fueled largely by significant increases in food and gas prices. The core index, excluding volatile food and energy prices rose 0.1 percent, indicating that inflationary pressures in most manufacturing industries remained tame.

“It’s amazing the CPI apparel price component is down 0.6 from a year ago despite the recent 153 percent year-to-year jump by cotton prices,” said John Lonski, chief economist at Moody’s Capital Markets Group. “Retailers have to be aware of the fact that wages have not kept pace with inflation and that is one of the problems.”

Lonski said retailers and wholesalers are “sharing the pain of higher raw materials prices.”

“What is more amazing is not only are cotton prices significantly higher, so are transportation costs,” Lonski said. “I still expect that apparel prices will grow significantly fairly soon and I also suspect that consumers will balk at the forthcoming price increases and as a result sales volumes are likely to soften.”

The only category in women’s apparel that showed dramatic price inflation was dresses, which rose 7.1 percent compared with February. Every other women’s price category declined. Prices for outerwear fell 3.5 percent, suits and separates prices declined 2.5 percent and prices for the combined underwear, nightwear, sportswear and accessories category dropped 1.3 percent.

In men’s apparel, the two price categories that increased were offset by declines in two other categories. Prices for men’s shirts and sweaters fell 2.8 percent in March compared with February, while prices for pants and shorts dipped 0.4 percent. Retail prices for sport coats and outerwear rose 0.1 percent and prices for men’s furnishings were up 0.5 percent.

Nigel Gault, chief U.S. economist at IHS Global Insight, said, “An inflationary spiral can only take root if wage inflation accelerates, which we don’t expect. Instead, rising prices are squeezing consumer pocketbooks and will restrain the growth in consumer spending volumes, which we estimate halved to 2 percent in the first quarter from 4 percent in the fourth.”

Gault said there were two factors at play in the apparel price declines in March — a later Easter this year, which means retailers did not introduce more full-price merchandise in February as they did last year when Easter fell in early April, and a reluctance on the part of retailers and wholesalers to pass on apparel price increases to consumer who are facing soaring food and energy prices.

“Clothing is something that is more price elastic, so that if your spending power is squeezed by food and energy prices, and on top of that you see clothing prices go up, then you…wait on buying clothing and hope for more reasonable prices in the future,” he said.

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