WASHINGTON — Retail apparel prices rose a seasonally adjusted 1 percent in January compared with a month ago, as apparel brands and retailers started passing on higher cotton prices through to consumers.
Women’s apparel prices increased 5 percent month-to-month, while men’s apparel prices were up 0.6 percent, the Labor Department said Thursday in its Consumer Price Index. On a yearly basis, however, women’s apparel prices were down 0.6 and men’s apparel prices were 0.3 percent lower. All apparel retail prices were flat year-over-year.
The CPI report followed Labor’s report on Wednesday of producer prices that showed a much more dramatic impact of higher-priced cotton on yarns and fabrics, with many cotton categories posting double-digit increases on a monthly and yearly basis. Economists said consumers have not yet felt the full impact of higher retail prices because companies have just started raising the price of apparel to try to offset higher raw cotton prices.
John Lonski, chief economist at Moody’s Capital Markets Group, said the staggering increases in cotton prices are not translating into the same rises in apparel retail prices at this point. The spot price of cotton, which was $1.84 on Thursday, represented an increase of 157 percent versus a year earlier, while retail apparel prices dropped 0.6 percent in the same time period.
“I think what we’re going to find is that manufacturers and retailers will perhaps continue to attempt to increase apparel prices in response to sharply higher materials costs, as shown by the latest surge in the price of cotton,” said Lonski, “Whether or not these price increases will stick is problematic. We may well find the consumer will balk at paying significantly higher prices for apparel, and if the consumer cuts back on purchases of apparel, owing to higher prices, unsold inventory will mount and that will ultimately put downward pressure on apparel prices.”
Women’s outerwear prices rose 3.6 percent in January compared with December and were up 2.3 percent year-over-year, while retail dress prices rose 0.5 percent month-to-month but fell 1.7 percent compared with a year earlier, and suits and separates prices increased 2.2 percent last month but fell 1.6 percent year-over-year.
Men’s shirts and sweater prices gained 2.2 percent last month but fell 1.5 percent against a year earlier, while pants and shorts retail prices increased 1.7 percent in January and 2.3 percent compared with January 2010. Girls’ apparel prices rose 1.6 percent last month but fell 2.4 percent compared with a year earlier, and boys’ apparel prices were up 2.4 percent in January and 2.1 percent year-over-year.
Prices for all goods and services rose 0.4 percent last month, driven largely by a big increase in gas and food costs, but higher commodity prices, ranging from cotton to oil, were also a major factor. Core prices that exclude volatile food and energy prices gained 0.2 percent, marking the largest increase in over a year.
“The inflation story is being driven by food and energy right now,” said Nigel Gault, chief U.S. economist at IHS Global Insight. “Rising oil prices have been driving gasoline higher for some time, and now we are also seeing rising food costs filter through to the consumer.”
Gault said absent an increase in wages, which he does not expect, inflation will not continue at its recent pace.
“Instead, rising prices are squeezing consumer pocketbooks and will restrain the growth in consumer spending volumes,” Gault said.