Volatile cotton prices continued to put upward pressure on wholesale prices for U.S.-made apparel and finished textiles in August, the U.S. Labor Department’s Producer Price Index revealed Wednesday.
Domestically produced apparel prices rose 0.8 percent in August compared with July and were 3.6 percent higher than August 2010.
Prices on U.S.-made women’s apparel rose 0.5 percent last month and were up 1.8 percent over a year earlier. Within that category, prices for tailored jackets and vests rose 5.5 percent in August and were 5.7 percent higher than a year earlier. Men’s apparel prices rose 1.5 percent in August and were 5.2 percent higher than a year earlier. Within that category, wholesale prices for knit shirts soared 10.1 percent last month and were 19.3 percent higher than a year earlier.
The PPI for apparel isn’t considered a key price indicator, since a vast majority of goods are imported. The Consumer Price Index, set to be released today, is a more important gauge, since it includes all goods sold at retail.
While cotton prices have fallen considerably from their highs of more than $2 a pound in March, the entire pipeline is still feeling the impact as the goods move through to retail.
U.S.-made apparel fabric prices were up 0.8 percent in August and were 14.5 percent higher than August 2010. Within that category, finished fabric prices rose 3 percent last month and were 9.8 percent higher than a year earlier.
But further down the pipeline, prices on some domestically produced products started to ease downward. For example, prices on U.S.-made gray fabrics fell 2.7 percent in August but were still 15.7 percent higher than August 2010. Prices on domestically made knits also fell 0.1 percent last month but were up 16.5 percent against a year earlier.
“Finished products [prices] were more on the upside and crude products more on the downside,” said Gregory Daco, principal U.S. economist at IHS Global Insight. “I think what this is indicating is that, given there is some weakness on the domestic front, there is downward pressure on prices, basically coming from lower demand. I think that will continue to be the case as we continue to see this weakness in the U.S. economy. The general idea is that the lower prices on the crude [or input] front will slowly move up the supply chain and lead to lower finished goods prices.”
Daco noted that businesses have had to deal with higher input costs for several months at the same time consumption has been weak.
“They have either reduced their margins and have avoided passing along the higher costs to consumers or in some cases they have passed on the higher costs to consumers on a gradual basis and risked losing some of their business,” Daco said.