WASHINGTON — Surges in apparel imports fueled more price-cutting at retail and, in turn, more deflation in women’s and all apparel retail prices in May, the Labor Department’s Consumer Price Index revealed Tuesday.
Retail prices for women’s apparel fell a seasonally adjusted 0.3 percent against April, continuing a long-term deflationary slide. Compared with May 2002, women’s apparel prices were off 3.3 percent.
Prices for apparel at retail also fell 0.3 percent on a seasonally adjusted basis in May against April and plummeted 3.6 percent year over year.
Michael J. Donnelly, senior economist at Global Insight, said the May decline in apparel prices is part of a “secular trend” that he expects to continue as China grabs more import market share.
Quotas on all apparel and textile imports will be eliminated on Jan. 1, 2005, as part of the 10-year global phaseout among 146 World Trade Organization member nations, and China is expected to dominate global apparel production.
“As long as China takes a greater and greater market share, there will be deflationary pressures on clothing prices,” Donnelly said. “This is a very long-term trend where any sort of goods traded are open to all sorts of deflationary pressures.”
A 1 percent increase in clothing and accessories sales last month indicates consumers were taking advantage of bargains, he said.
“Consumers are picking up on good values and the economy picked up in May, so we expect to see more disposable income moving to clothing,” Donnelly said.
A Labor apparel analyst said 41.3 percent of the women’s apparel sample at retail was on sale versus previous months, where the sample hovered in the mid-30-percent range.
“This month showed the largest percentage of sales in women’s apparel,” she said. “It has to do with the economy in general.”
She said retailers are trying to unload excess inventory.
“It was expected to happen throughout the summer season until the fall-winter season because of larger inventories and the war,” she added. “People were not buying as much.”
Overall, prices for all retail goods in May were unchanged, but the core index, stripped of volatile food and energy prices, rose by 0.3 percent. Consumer buying accounts for two-thirds of U.S. economic growth, and the CPI is the most widely used gauge of U.S. inflation.
Economists said the rise in the core index runs counter to the Federal Reserve’s deflationary concerns. Donnelly said his company is predicting a big “pickup” in consumer spending in the third quarter and retailers will take advantage.
“Consumers will get a bit of a break on expenditures as the price of oil falls, which means they will have more money in their pockets,” he added.
Meanwhile, among the categories of women’s apparel tracked by the government, retail prices for women’s outerwear showed the largest May decrease on record, falling a seasonally adjusted 2.4 percent, according to the Labor analyst. Compared with May 2002, outerwear prices fell 3.4 percent.
Prices for suits and separates fell 0.9 percent in May and plummeted 3.9 percent against a year ago, while prices for underwear, nightwear, sportswear and accessories rose 0.6 percent last month but fell 1.4 percent. Retail prices for dresses rose 2.2 percent in May, but plunged 4.3 percent against May 2002.