DOMESTIC APPAREL PRICES DROP 0.8%

Byline: Kristi Ellis

WASHINGTON — Imports and a strong dollar continued to put deflationary pressure on domestically produced apparel prices in March, the Labor Department’s Producer Price Index revealed Friday.
Wholesale prices for U.S.-produced women’s apparel fell 0.8 percent in March against February, continuing a decline from the prior month. Compared with year-ago levels, domestically produced women’s apparel prices fell 2.1 percent.
Wholesale prices for all apparel fell 0.4 percent in March against February and were off by 1.3 percent for the year. Girls’, children’s and infants’ apparel prices remained unchanged in March and were up 0.5 percent against March 2001.
“Apparel prices are falling because the dollar is strong and cheap imports are increasing at the same time stores are discounting,” said Rajeev Dhawan, director of economic forecasting at Georgia State University.
Dhawan said the prognosis is retail prices will continue to decline as long as wholesale prices fall.
“If retail prices fall faster than the cost of production, you are in trouble,” said Dhawan. “That may be happening now due to lack of demand, but that cannot last forever.”
For all U.S. goods, wholesale prices last month shot up 1 percent, pushed by a sharp increase in energy prices.
“This is the kind of cost pressure from an unfortunate situation [war in the Mideast] not because of tightness in the market,” said Dhawan. “This will cause friction and costs to rise for customers. It’s not trivial.”
Dhawan said even though the recession is technically over, people continue to get bargains at retail. “That is the problem,” he said.
“Recovery comes from companies expanding, producing more and increasing investment,” Dhawan said. “This time, it is in reverse because we have a big consumption boom right now due to atypical discounts on cars and good discounts on clothing, so people are spending. But there isn’t a corresponding increase in investment by firms because ceo’s are gloomy and holding back.”
Among the women’s wholesale price categories tracked by Labor with significant price fluctuations were swimsuits, which plunged 8 percent in March against February and fell 11.8 percent against the year-ago period. On the plus side, prices for women’s knit outerwear, sportshirts and sweatshirts gained 1.1 percent last month against February and rose 5.7 percent year-over-year.
Several other women’s apparel price categories, including tailored coats, bras, nightwear and hosiery, remained unchanged for the month. Although prices for panties remained unchanged in March against February, they fell 4.1 percent year-over-year.

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