WASHINGTON — Inflationary price pressure in raw materials continued to weaken, driving down U.S.-made apparel prices 0.1 percent in June compared with May, the Labor Department’s Producer Price Index showed Friday.
While prices on domestically produced apparel were 1.7 percent higher year-over-year, the monthly trend has been one of deflation in prices, as the raw cotton price spikes of last year of more than $2 a pound dropped significantly this year to below 90 cents a pound.
“This is something we have been expecting for a few months [the drop in overall apparel prices], considering how much cotton prices have fallen,” said Jeet Dutta, senior economist at Moody’s Analytics. “Other input costs have generally been falling, so you would expect at some point for these cost savings to be pushed the down supply chain and we are starting to see that in the decline in the headline number for apparel.”
Women’s and girls’ domestically made apparel prices rose 0.1 percent in June compared with May and were still 0.5 percent higher than a year earlier. Men’s and boys’ apparel prices fell 0.8 percent in June but were 5.2 percent above prices in June 2011.
There was still some inflationary price pressure within the women’s and girls’ category. Prices on domestically produced knit shirts and blouses rose 0.3 percent in June, while prices on woven shirts rose 0.1 percent. Prices on jeans and slacks rose 0.1 percent for the month.
Within the men’s and boys’ category, which showed signs of deflation, prices on work shirts plummeted 21.6 percent in June compared with May, while prices on domestically made nontailored coats, jackets and vests rose 0.8 percent in the month.
Dutta said he does not see anything “systematic” in the bump up in inflation in women’s apparel prices, noting it could be “month-to-month volatility.” He noted that men’s prices fell significantly, primarily driven by the huge monthly drop in men’s work-shirt prices, which Dutta said is partly seasonal and partly attributed to declining cotton prices.
Since more than 85 percent of apparel sold in the U.S. is imported, the PPI isn’t considered a key gauge of prices. The Consumer Price Index, set to be released on Monday, is a better indicator, since it includes the price of all goods sold at retail, including imports.
In the overall economy, wholesale prices on finished goods rose 0.1 percent in June, despite economists’ expectations of a decline, due to lower gas prices. It was driven primarily by an unexpected spike in food prices. The core PPI index, which excludes volatile food and energy prices, rose 0.2 percent in June.
Despite some modest signs of inflation in the overall index, Dutta said “deflationary forces still appear to have the upper hand.”
“The headline number inched up, but if you look at what happened in the earlier stages of production, prices are falling quite substantially,” Dutta said. “It seems like cost pressures for firms are still diminishing.”