WASHINGTON — Caught in a broader deflationary cycle, retail apparel prices fell 0.2 percent in December as overall consumer prices declined, the U.S. Labor Department’s Consumer Price Index showed Wednesday.
Prices for women’s apparel dropped a seasonally adjusted 0.8 percent last month compared with November. Prices for girls’ apparel remained flat. Men’s apparel prices rose 1.6 percent, but boys’ apparel prices fell 2.2 percent.
“Overall, retailers’ pricing power has been limited. It’s not just apparel,” said Ryan Sweet, director of real-time economics at Moody’s Analytics. “Across the board, retail prices are falling. Retail deflation is among the worst we’ve seen in recent years.”
Sweet said higher inventories this holiday season and overall import price declines have led to deflation in apparel retail prices.
“Reversing this trend could be difficult for apparel retailers given that cotton prices are falling and Chinese import prices continue to decline,” Sweet added.
Consumers are also reacting negatively to price increases, Sweet noted.
“Consumers, even though their financial situation has improved significantly since the end of the recession, are still very price sensitive,” Sweet said. “Any increase in prices here or there will have consumers cutting back on spending.”
In addition, unseasonably warm weather has led to excess inventories of seasonal apparel and could be putting downward pressure on prices, Sweet said. The deflationary pattern in consumer prices is expected to continue this year.
In the women’s category, prices for dresses fell 2.7 percent in December and prices for outerwear fell 2.5 percent. Prices for suits and separates dropped 0.6 percent. Prices for the combined underwear, nightwear, sportswear and accessories category showed the only sign of strength, rising 1.5 percent.
Men’s wear price increases were led by furnishings, which rose 3.8 percent, and pants and shorts, up 2.5 percent, while prices for shirts and sweaters remained flat. In the combined category of suits, sport coats and outerwear, prices fell 1.7 percent.
In the overall economy, retail prices fell 0.1 percent. Core prices, excluding volatile food and energy prices, rose 0.1 percent.
“Recently, a retail inventory accumulation in the third quarter had many retailers offering early and deep price promotions. In addition, a stronger dollar is also assisting in lowering imported consumer goods prices,” said Chris G. Christopher Jr., director of consumer markets at IHS Global Insight. “The unseasonably warmer weather has contributed to a retail apparel inventory accumulation, forcing many retailers to slam clothing prices. In December, apparel prices were down 0.9 percent on a year-over-year basis.”
Christopher said in coming months, “We expect consumers to enjoy the benefits of lower energy prices and core good inflation. Many households are using pump price relief to pay down debt.”