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Retail Apparel Prices Dip in June, But Increases Seen on the Horizon

Retail apparel prices fell a seasonally adjusted 0.9% in June after being unchanged in May, but were up 0.6% from a year earlier, the Bureau of Labor Statistics reported Thursday in the Consumer Price Index (CPI).

Women’s and girls’ apparel prices declined 1.4% for the month, while men’s and boys’ clothing prices dipped 0.1% compared to April. The falloff runs counter to increases in raw materials prices, which have been on the rise, and is likely indicative of retail trends, including the strength of off-price merchants, a shift to summer goods from spring merchandise, and a softness in overall pricing power in the highly competitive sector.

Cotton prices, for example, have jumped in recent months. Values for July New York futures surged 13 percent to about 95 cents a pound this month from levels near 84 cents a pound a month ago. The A Index, an average of global cotton prices, have climbed to more than $1 a pound for the first time since March 2012, from 94 cents a pound about a month ago.

Experts predict that raw material and apparel prices will spike in coming months due to the import tariffs already imposed or set to be imposed this fall on textiles and some clothing from China, the largest supplier of apparel to the U.S. Rick Helfenbein, president and CEO of the American Apparel & Footwear Association, said including items such as handbags, hats and textiles on the list of products subject to proposed new tariffs “will result in inflationary costs throughout the supply chain, ultimately paid for by American consumers.”

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Apparel prices also ran counter to the overall CPI for consumer goods, which increased 0.1% percent in June and was up 2.9% for the 12 months. The core index, which excludes the volatile food and energy sectors, rose 0.2% in June.

Ken Matheny, executive director of U.S. economics at Macroeconomic Advisers by IHS Markit, said the 12-month change in the core CPI increased one-tenth to 2.3%, the highest since January 2017.

“Based upon today’s report, our estimate of the 12-month change in the core personal consumption expenditures (PCE) price index in June is 1.9%,” Matheny said. “We expect the 12-month change in core PCE to move up to 2.0% over the next few months.”

Looking deeper into apparel, women’s wear prices fell 1.2% last month, led by declines of 3.5% in dresses and 3.4% in the underwear, nightwear, sportswear and accessories category, balanced somewhat by price increases of 0.5% in outerwear and 0.1% in suits and separates. Men’s wear prices inched up 0.1% in the month, with gains of 0.5% in shirts and sweaters, 0.3% in furnishings and 0.2% in pants and shorts, while prices for suits, sport coats and outerwear were off 0.3%.

Also important to manufacturers and merchants, the energy index declined 0.3%, with the indexes for electricity and natural gas both falling as the gasoline index rose 0.5%. Looking at other indexes that could impact disposable income and retail spending, the food index rose 0.2% in June after being unchanged in May. The shelter index rose 0.1% and the indexes for medical care, used cars and trucks, new vehicles and recreation all increased. Joining the apparel sector, indexes that saw declines were airline fares, and household furnishings and operations.