WASHINGTON — Retail apparel prices fell in October, as a strong dollar allowed for cheaper imports, the U.S. Labor Department’s Consumer Price Index showed on Tuesday.
Overall apparel prices fell a seasonally adjusted 0.8 percent last month, following a decline in September after price increases in August and July.
“Retailers’ pricing power is being tested,” said Ryan Sweet, director of real-time economics at Moody’s Analytics. “Inventories are potentially going to be problematic over the next few months. Even though we assume we are going to get a decent holiday shopping season, I think retailers will find themselves with an excess in inventories and that is going to really erode their pricing power.”
He noted that a stronger dollar and falling import prices likely led U.S. retailers to increase inventories this year.
“The U.S. is importing a ton of [deflation] from China,” Sweet said. “That typically weighs on U.S. goods prices.”
Prices for women’s apparel fell 0.4 percent in October, while prices for girls’ apparel dropped 2.9 percent. Men’s apparel prices fell 2.1 percent, but boys’ apparel prices rose 2.9 percent last month.
In the women’s category, prices for dresses posted the largest decline, falling 3.6 percent in October, while prices for the combined underwear, nightwear, sportswear and accessories category dropped 1.3 percent. Two categories showed some sign of strength. Prices for suits and separates rose 1.1 percent and prices for outerwear increased 0.8 percent.
Men’s wear price declines were led by pants and shorts, which fell 2.6 percent last month. Prices for shirts and sweaters declined 2.5 percent and prices for furnishings dropped 0.6 percent. In the combined category of suits, sport coats and outerwear, prices edged up 0.1 percent.
Prices for all goods sold at retail rose 0.2 percent, while core prices, excluding volatile food and energy pieces, also increased 0.2 percent in October.
Chris G. Christopher Jr., director of consumer economics at IHS Global Insight, said consumer prices increased at the fastest pace since June, largely driven by rising energy prices.
But retailers selling consumer products are faced with excess inventories and offering deep discounts, he said.
“The retail inventory accumulation of apparel due to poor clothing sales has many retailers offering some pretty sweet pricing,” Christopher said. “Warmer weather has many shoppers avoiding clothing stores. Apparel prices fell 0.8 percent in October, after a 0.3 percent hit in September.”
Christopher also noted that an “unplanned” inventory buildup in the third quarter is “placing pressure on many retailers to speed up holiday pricing discounting this year in order to eliminate excess inventory.”
“This is good news for holiday shoppers, but bad news for retailers,” he added.
The other factor affecting prices was a stronger dollar, which lowered imported consumer goods prices.
“On a quarterly basis, these prices have been in negative territory on a year-over-year basis since the second quarter of 2013,” Christopher added. “We expect those prices to be down 0.4 percent year-over-year in the fourth quarter, after a 0.5 percent decline in the third quarter.”