WASHINGTON — The deflationary cycle continued in February, as wholesale prices for domestically produced women’s apparel slid 1.5 percent.

This story first appeared in the March 17, 2003 issue of WWD. Subscribe Today.

Compared with February 2002, domestic wholesale prices for women’s fell 0.7 percent, according to the Labor Department’s Producer Price Index released Friday.

Wholesale prices for all apparel fell sharply by 0.9 percent last month and declined 0.5 percent against the year-ago month. Prices for girls’, children’s and infants’ apparel bucked the trend, rising 2.9 percent in February, although they were flat against year-ago levels.

Textile mill producer prices also fell in February by 0.6 percent and dipped 0.5 percent year-to-year.

“There is just no pricing power and it goes up and down the supply chain,” said Charles W. McMillion, chief economist at MBG Information Services. “With demand weakening, customer competition intensifying and enormous unused capacity, producers are having to slash prices to hold on to market share.”

He said companies will continue to feel the squeeze on margins due to unused capacity and falling prices.

“Over the course of the year, we will see many more plant closings and layoffs accelerating,” said McMillion. “The continual price declines puts the profitability of more companies in question.”

Meanwhile, wholesale prices for all finished goods for the month rose 1 percent, but economists blamed most of the increase on soaring energy prices. Minus volatile energy and food prices, the core index fell a seasonally adjusted 0.5 percent, according to John Mothersole, senior economist at Global Insight.

“We are getting these big energy-induced price increases, yet underlying core prices are falling,” Mothersole said. “There is a dichotomy between cost pressures manufacturers are obviously getting hit with and their [inability] to push those through to final product prices, and as a result margins are still being squeezed.”

Mothersole said apparel prices are primarily being impacted by fierce competition and imports.

“Domestic apparel producers are really feeling the pinch,” he said. “They are struggling with the whole import phenomenon and facing cut-throat competition overseas, and they are getting pounded.”

Among the categories of women’s apparel tracked by the government with notable wholesale price fluctuations were hosiery, which plunged 7.1 percent last month but remained flat against a year ago, and dresses, which fell 3.4 percent in February and also remained flat against the year-ago month.

Producer prices for slacks, jeans and dungarees fell 2.2 percent last month and were even to a year ago, while wholesale prices of separate tailored suit jackets fell 1.4 percent in the month and remained flat year-over-year. On the plus side, prices for bathing suits rose 10.6 percent in February, but remained flat against a year ago, while prices for skirts rose 4.1 percent last month and edged up 0.3 percent compared with February 2002.

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