RETAIL WOMEN’S APPAREL PRICES TAKE ANOTHER BIG HIT IN FEB.
Byline: Joanna Ramey
WASHINGTON — February’s Consumer Price Index, released Thursday by the Labor Department, provided another dramatic example of the heavy lid retailers are keeping on women’s apparel prices.
The prices showed their largest monthly decline in six months, dropping a seasonally adjusted 1.9 percent against January. Against February 1994, women’s apparel prices at retail plunged 4.7 percent, the largest year-to-year decline since separate record keeping for the category began in 1978.
“We’re still seeing long-term deflation for women’s apparel,” a Labor analyst said.
By comparison, retail prices for all consumer goods last month increased 0.3 percent against January and were up 3 percent from year-ago levels. Furthermore, all other apparel categories — men’s, boys’ and girls’ wear — showed month-to-month hikes in price.
The February drop in women’s apparel prices is the second largest monthly decline in the last year, which has seen the bottom for these prices repeatedly tested. A price drop of 2.3 percent in August was the largest monthly decline. For all of 1994, women’s apparel prices took a 4.4 percent nose dive.
“I don’t think you can predict this is the bottom,” said Laura Baughman, president of The Trade Partnership Group, a Washington trade and economic consulting firm. “It is a highly competitive industry. Women’s apparel sales, which have shown a tendency to be slowing, put pressure on retailers to discount.”
Furthermore, in view of current criticisms of the CPI as having an upward bias in measuring inflation, the deflation in women’s apparel prices might even be more acute.
Nevertheless, pressures to increase prices are in the works for domestically produced and imported apparel.
For U.S.-made apparel, the effect of a months-long upward march of raw material prices is starting to be reflected in fabric prices, and some of this is expected to be passed along, at least in part, to retailers, some analysts note. Also, because of the dollar’s falling value, retailers are paying more for imported apparel.
Consequently, these twin price pressures will result in apparel prices at retail starting to turn upward in April, said Donald Ratajczak, director of the Economic Forecasting Center at Georgia State University in Atlanta. Ratajczak predicts all apparel prices will increase 2.2 percent this year, compared to a 1.9 percent decline in 1994.
“A late Easter should restrain clothing prices until April,” Ratajczak writes in his latest retail price report. “A jump in prices is likely in April, if only to reflect a surge in cotton prices and weakness of the dollar.”
Another view, though, comes from Carl Steidtmann, director of research, Management Horizons, a division of Price Waterhouse. While rising costs for raw materials will push up domestic apparel prices, the impact will be likely be marginal since those costs comprise only 5-8 percent of a garment’s value, he said. He also sees the devalued dollar having no sway over imported apparel prices since the currency has dropped primarily against those of Japan, Germany and Switzerland, not big shippers of apparel to the U.S.
Regardless of outside forces, Steidtmann said, consumer pressure on retailers to keep prices down, along with industry competition, is enough to keep prices from increasing greatly. But with many inflationary pressures at work, 1995 won’t be as deflationary as 1994. Management Horizons has forecast apparel prices to drop 0.5 percent this year. “At the beginning of the [spring/summer] season you will see attempts to raise prices, not that they are going to stick,” he said.
All apparel prices fell 0.7 percent in February against January, the drop moderated by a 1.6 percent price hike in girls’ apparel, an increase of 2.9 percent for boys’ and a 0.3 percent rise in men’s wear. Against February 1994, all apparel prices last month were down 1.4 percent.