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Apparel Prices Drift Lower Despite Overall Inflation Uptick

Overall inflation sustained its biggest monthly increase in two and a half years in December, driven by higher costs for housing, gasoline and medical services. Food remained flat and apparel prices fell slightly.

According to Consumer Price Index (CPI) data released last week by the U.S. Department of Commerce, prices for all goods and services rose by 2.1% (adjusted for seasonality) compared to the same month last year, with the core rate of inflation, which excludes food and energy price moves, rising 2.2%.

The index for apparel and footwear, however, decreased by 0.1%. Apparel prices (excluding footwear) dropped by 0.6% compared to December 2015. Footwear prices rose by 1.4%.

Merchants relied even more heavily on price promotions, couponing, “special purchases” and off-price strategies to stimulate consumer purchasing this year than last.

Womenswear prices increased by 0.3% in the month, while menswear prices fell 3.2%.

Children’s apparel suffered a 2.5% price decline, driven by downward pressure on boys’ and infant’s apparel prices.

Government consumer price indices are based on ticketed and sale prices of products, but do not take into account the impact of discounts applied to entire orders, loyalty point redemption, bundled merchandise discounts or other promotions. Given the increased use of these tactics by retailers, it is safe to say that official CPI data are, if anything, an understatement of the widespread price erosion within the apparel sector.

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