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Retail Apparel Prices Flat in December, as Core CPI Rises

As holiday price cutting peaked in December, retail apparel and footwear prices were flat on a seasonally adjusted basis compared to the prior month, the U.S. Bureau of Labor Statistics (BLS) reported Friday in the Consumer Price Index (CPI) report.

Women’s apparel prices rose a seasonally adjusted 0.2 percent for the month, while men’s clothing prices were down 1.3 percent. Prices for girls’ apparel fell 1.9 percent month-to-month, as the cost for boys’ apparel was 1.1 percent higher than November. Prices for infants’ and toddlers’ apparel rose 1.2 percent for the month.

In women’s wear, prices on all categories were up–outerwear at 2.8 percent, suits and separates at 1.1 percent and dresses at 1 percent–except the underwear, nightwear, sportswear and accessories group, where prices fell 0.9 percent.

In men’s wear, prices on all categories were down–furnishings dipped 2.1 percent, shirts and sweaters 1.4 percent, and pants and shorts prices were 1.2 percent lower–except for the suits, sport coats and outerwear group, which rose 2.1 percent in the month.

In footwear, women’s footwear prices were down 0.6 percent and boys’ and girls’ product costs came in at 0.4 percent less, both on a seasonally adjusted basis, where calendar shifts and other technical issues are calculated into comparisons. However, men’s footwear prices presented by BLS on a non-seasonally adjusted basis were down 0.5 percent month-to-month, creating the anomaly of all categories posting a decline in prices, but the overall sector prices were flat.

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The overall CPI declined 0.1 percent in December on a seasonally adjusted basis after being unchanged in November. The falloff was caused by a sharp decrease in the gasoline index, which fell 7.5 percent in December, BLS noted. This more than offset increases in several indexes including shelter, food and other energy components. The energy index fell 3.5 percent, as the gasoline and fuel oil indexes fell, but the indexes for natural gas and for electricity increased.

The core CPI, minus the volatile food and energy sector, increased 0.2 percent in December, the same amount as in October and November. Along with the index for shelter, the indexes for recreation, medical care, and household furnishings and operations all increased in December, while the indexes for airline fares, used cars and trucks, and motor vehicle insurance all declined.

The all items index increased 1.9 percent for the 12 months ending December, the first time the 12-month change has been under 2 percent since August 2017, BLS noted, indicating minimal inflation in the economy. The core index rose 2.2 percent over the last 12 months, the same increase as for the 12 months ended November.

Ken Matheny, executive director of U.S. economics at Macroeconomic Advisers by IHS Markit, said, “Based on today’s report, our estimate of the 12-month change in the core PCE (personal consumption expenditures) index in December remains at 1.8 percent. We made no revision to our estimates for fourth-quarter and first-quarter real PCE growth.”

This left fourth quarter gross domestic product (GDP) tracking at 2.8 percent growth and first quarter GDP tracking at a 1.6 percent increase, according to Matheny. This compares to third quarter GDP growth of 3.4 percent and second quarter growth of 4.2 percent.

Joel Prakken, chief U.S. economist at Macroeconomic Advisers by IHS Markit, issued a report last week noting that the government shutdown that began in the last 10 days of 2018 was enough to reduce the fourth-quarter growth rate of real GDP by 0.12 percent compared to a “no-shutdown” baseline.

“Assuming the shutdown lasts two weeks into 2019, the effect would be to reduce first-quarter GDP growth by 0.06 percent, but then boost second-quarter GDP growth by 0.18 percent [if] federal employment returns to normal,” Prakken said.

The direct impact of the shutdown on real GDP, adjusted for inflation, is the real value of the government services not produced by the furloughed workers, which he said, “is lost forever, as the workers will not make up the time lost in the workplace after the government reopens.”

“The indirect impact of the shutdown is reflected in BEA’s (Bureau of Economic Advisers) source data and so is not directly observed,” Prakken added. “For example, workers whose pay is delayed may delay spending, temporarily reducing personal consumption or private commerce and spending might be disrupted by delays in the issuance of licenses and permits, by delays in court proceedings or the closure of public parks and monuments.”