SLIM RISE FOR WHOLESALE PRICES

Byline: Joanna Ramey

WASHINGTON — Wholesale prices for U.S.-made women’s apparel in March continued in a low-inflation mode.
In its monthly Producer Price Index released Friday, the Labor Department reported that women’s apparel prices showed a slim, seasonally adjusted 0.1 percent rise against February. The increase follows upticks of 0.2 percent in February and 0.1 percent in January. Compared to year-ago levels, women’s apparel prices last month were up 0.3 percent.
“There are no price increases to speak of,” said Jeff Sands, director of KPMG Peat Marwick’s national apparel practice, ticking off reasons underlying the inability of manufacturers to raise costs: “There’s competition among vendors to sell to retailers, competition among retailers and soft demand.”
Wholesale prices for all apparel in March increased 0.1 percent against February and were up 0.3 percent over the year. Prices for men’s and boys’ apparel at the producer level were up 0.2 percent for the month and up 0.3 percent against March 1996, as prices for girls’, children’s and infants’ apparel were unchanged for the month and increased 2.1 percent from year-ago levels.
By comparison, prices for all finished goods declined 0.1 percent for the month and were up 2.4 percent from March 1996. However, when the volatile food and energy indexes are taken out of the equation, wholesale prices for finished goods last month increased 0.4 percent, following a 0.1 percent monthly decline in February. The March jump in the index, minus food and energy, was the largest increase in 14 months and triggered expectations among economists of further interest rate hikes by the Federal Reserve.
Ken Goldstein, an economist with the Conference Board, said the wholesale price index, less food and energy, is more reflective of what’s happening in the robust economy. He said higher interest rates are to be expected in the second and third quarters as a means to keep the economy from overheating. However, higher rates won’t translate into dampened consumer confidence or retail sales, he forecast.
“There’s strong hiring and increasing hourly wage rates, which are showing up in strong increases in economic growth and consumer confidence,” he said.
Like apparel, prices for domestically produced textiles are largely depressed because of stiff competition for business, particularly among apparel makers, said David Link, chief economist, American Textile Manufacturers Institute. Textile prices in March were unchanged against February and were up 0.5 percent against year-ago levels. For the first quarter of this year, textile prices were up just 0.5 percent against the same period last year. By comparison, for all of last year textile prices gained 1.4 percent.
“There is still some resistance in the market to increase prices,” Link said, reflecting on the pressures apparel makers are under from retailers to keep prices in check. “Consumers aren’t going to accept more expensive apparel. I think they’re used to buying it on sale.” Helping textile mills cope with demands for lower prices on their finished goods is the fact that their raw material prices have been declining after more than a year of price surges, Link said.
While fabric makers recently talked of seeing raw material price increases on the horizon (Trevira announced an upcoming hike of about 3 percent on its polyester staple late last month), prices for fibers were generally down in March against a year ago, according to the PPI. Synthetic fiber prices declined 2.3 percent against February and were down 0.3 percent against year-ago levels. Raw cotton prices last month, while up 0.3 percent against February, were down 7.9 percent from March 1996.
Prices for gray goods were up 0.1 percent for the month and down 0.1 percent over the year, as finished fabric prices dipped 0.1 percent in March and were up 0.3 percent from March 1996.
Meanwhile, among the women’s apparel categories tracked by Labor in its Producer Price Index, dresses posted the largest declines in March, dropping 8 percent for the month and 28.7 percent over the year. Prices for skirts declined 0.7 percent in March and were down 1.4 percent over the year, as prices for slacks and jeans rose 0.9 percent for the month and posted a gain of 1.2 percent over the 12-month period.
Prices for suits increased 0.9 percent for the month and were up 1.2 percent over the year. Swimsuit prices were unchanged in March, but were up 21.7 percent against year-ago levels.

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