WASHINGTON — The Labor Department reported Thursday that retail prices for women’s apparel in August declined a seasonally adjusted 0.4 percent from July levels. That was the second consecutive monthly drop, after a brief mid-year rally.

Women’s apparel prices were up 0.4 percent from their year-ago level, according to the Consumer Price Index report.

Economists pin the price cutting on retailers’ desire to pump up sagging sales in the face of declining consumer disposable income. Earlier this year consumers’ incomes had been boosted by federal tax refunds and mortgage refinancing, as well as a surge in hiring that has since tapered off. Higher gasoline prices are also cited for taking a bite out of apparel sales, as well as an excess supply of garments.

“Growth has slowed,” said John Mothersole, economist with Global Insights. “The economy’s hit a soft patch.”

He said the CPI report influenced his firm’s decision to revise its 2004 gross domestic product growth forecast to 4.3 percent. Previously, it had forecast a 4.8 percent rise.

Overall, total apparel prices in August fell 0.2 percent against July and were off 0.6 percent over the 12 months.

Girls’ apparel prices dipped 0.1 percent for the month, which left them 4.1 percent below year-ago levels. Men’s apparel prices took the largest monthly apparel price hit, dropping 1.1 percent in August, though they were still 0.3 percent higher than they’d been at that point in 2003.

Frank Badillo, economist with Retail Forward Inc., said sagging consumer buying power led to the price dips.

“I expect the price declines to continue, particularly as we move into 2005 and see the effect of the elimination of quotas” on global apparel and textile trade, Badillo said. The removal of quotas is expected to further unleash global apparel competition by removing supply restraints on countries.

Earlier this week the Commerce Department reported sales at clothing and accessories stores in August fell a seasonally adjusted 1.4 percent against July.

For all retail goods, prices in August increased a seasonally adjusted 0.1 percent for the month, for an annual gain of 3.7 percent. In July, retail prices declined 0.1 percent. The CPI is considered the government’s best measure of inflation, which economists don’t currently consider a major threat.

This story first appeared in the September 17, 2004 issue of WWD. Subscribe Today.

Meanwhile, women’s apparel categories tracked by the government for price changes had a mixed performance in August. Women’s outerwear prices increased a seasonally adjusted 3.8 percent for the month, for a 1.1 percent annual increase. August dress prices were down 1.9 percent, marking a 5.7 percent drop for the year. Suit and separates prices dipped 0.6 percent in August, but were up 2.9 percent over the 12 months. Underwear, nightwear, sportswear and accessory prices fell 1.6 percent for the month, a 1.3 percent decline from year-ago levels.