APPAREL PRICES BUCK INFLATION TREND
Byline: Joanna Ramey
WASHINGTON — Deflation is still in the mix for the apparel industry, the Labor Department reported Wednesday in its retail price report, which showed women’s apparel prices in January declining a seasonally adjusted 0.3 percent against December.
When compared to a year ago, women’s apparel prices last month also dipped 0.3 percent. The moderate year-over-year January decline stands in contrast to the large back-to-back price drops in December of 1.8 percent and in November of 1.6 percent.
Women’s apparel prices at retail haven’t seen a year-over-year increase since October 1998, when they inched up 0.7 percent.
A Labor Department apparel analyst said the slight 12-month decline in women’s apparel prices in January could be tied to fewer markdowns after large holiday discounting in December and November.
Meanwhile, all apparel prices in January declined 0.2 percent against December and were down 1.1 percent from January 2000 levels. Girl’s apparel prices dropped 1.8 percent for the month and declined 0.9 percent over the year, while men’s wear prices fell 0.9 percent in January against December and plunged 2.7 percent from year-ago levels.
In the overall economy, retail prices for all consumer goods as measured by the Consumer Price Index increased 0.6 percent in January against December, largely reflecting a jump in natural gas prices. When the volatile energy and food prices are removed, the core rate of retail price inflation last month was 0.3 percent.
The U.S. government said Wednesday the overall Consumer Price Index rose 0.6 percent in January, the biggest gain since last March. The core CPI, excluding volatile food and energy prices, advanced 0.3 percent last month. In December, the overall CPI was up 0.2 percent and the core CPI was up 0.1 percent.
The CPI is a key government index for inflation, in addition to the wholesale price report that last week posted a huge 1.1 percent gain and also reflected energy price increases.
Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University, said the larger-than-expected increases in January’s retail and wholesale price reports don’t signal the start of an inflationary cycle. He said energy prices have already started to moderate and both indexes, in turn, should mellow.
However, Dhawan said the price reports do present Federal Reserve Chairman Alan Greenspan with a dilemma in deciding whether — or by how much — to reduce interest rates further to keep the lackluster economy growing. If interest rates are cut too much, then the economy could run the risk of overheating, causing inflation.
“How aggressive [Greenspan] should be is the dilemma,” Dhawan said.
As for the decline in retail apparel prices, Dhawan said the persistent deflation is due in part to the strong dollar stretching farther in the low-priced import market.
“With the economic slowdown, you have some [excess] inventory, which also brings prices down,” Dhawan said.
Michael Connelly, senior economist with the WEFA Group, said he’s not worried that inflation is in the wings.
“We still think the Federal Reserve is going to cut interest rates,” Connelly said. “They are more worried about the economic slowdown than an overheating economy.”
However, inflation fears disrupted Wall Street, sending the Dow Jones Industrial Average down 1.9 percent, to 10526.58, and the Nasdaq down 2.1 percent, to 2268.93, close to its 52-week low. The “I-word jitters” eliminated gains among retail stocks picked up on Tuesday, sending J.C. Penney Co. down 8 percent, to $13.65; The May Department Stores Co. down 7.7 percent, to $35.91; Nordstrom down 7.6 percent, to $19.47; Target down 6.6 percent, to $34.80; and Wal-Mart down 6 percent, to $50.21. Declines were also widespread among many specialty retailers.
Economists are forecasting the economy this year to grow by 2 to 2.5 percent, compared to the 5 percent growth in 2000.
Meanwhile, in the categories of women’s apparel tracked by the government, prices for dresses fell 2.3 percent in January against December and were down 6.9 percent from January 2000, as prices for suits and separates posted a monthly decline of 4.5 percent and a 0.2 percent increase over the year.
Retail prices for underwear, nightwear, sportswear and accessories declined 0.3 percent for the month and were off 0.3 percent from year-ago levels. The only category to post a monthly price increase was outerwear, which rose 3.3 percent in January against December. Over the year, outerwear prices increased 7.5 percent, reflecting the category’s strong performance.