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Apparel Prices Firm, though CPI Fails to Tell the Whole Story

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Consumer prices for apparel recovered slightly in November, according to data just released by the U.S. Department of Commerce. The uptick in women’s and children’s clothing prices was somewhat offset by declines in those of menswear. The overall consumer price index (CPI) rose slightly compared to the same month in 2012, while the core rate of inflation, which ignores the impact of food and energy price moves, remained flat at 1.7%.

The CPI doesn’t tell the whole story, however. The U.S. government measure of consumer prices takes into account ticketed and sale prices of items across a broad cross section of retail channels, but does not consider coupons, buy one/get one programs, loyalty points or other discounting mechanisms that further erode total transaction dollars and compromise retail profitability.

The index for apparel fell 0.1%, its second decline in two months. Apparel merchants, challenged by the increasingly promotional retail environment, have been forced to reduce prices to compete. In the words of one retail analyst, merchants have “pushed the panic button” and resorted to price discounting to drive traffic and get their piece of the seasonal action. Time will tell, however, what the impact on gross margin and quarterly earnings will be.

Womenswear prices fell by 0.4% in the month, their steepest monthly plunge since the Great Recession, while menswear prices remained flat compared to last year.

Prices for infants’ and children’s apparel fell by 2.8%, with girlswear prices sliding the most, at 5.5%. Boys’ apparel prices increased 3.6%. A glut of tween girls’ clothing at department, discount and specialty stores has been putting downward pressure on prices.

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