Apparel Prices Plummet in December

Apparel prices spent December in a freefall, dropping 3 percent in the month, their biggest decline in more than a decade, according to data released Friday by the Bureau of Labor Statistics.

Overall unadjusted inflation in the U.S. increased year-over-year by 0.8% in the month, falling below 1 percent for the first time since October 2009, as lower energy prices more than compensated for persistently high food prices. Taking food and energy out of the picture, the CPI rose by 1.6%, relatively unchanged from the past few months.

The index for apparel and footwear, by contrast, dropped by a staggering 2 percent, the biggest decrease for the combined segments in 11 years. In November, prices were relatively flat for apparel and footwear.

CPI1

The steep drop in apparel more than made up for a 2.8% increase in footwear prices, their biggest increase in a year and a half.

CPI2

Apparel price declines were 3.5% in women’s and 3 percent in men’s. Infant’s/children’s apparel prices were flat in the month, below last month’s more than 2 percent increase.

CPI3

What was behind these declines? Price promotions, pure and simple. Retailers went into panic mode during the last weeks leading up to and the one following the Christmas holiday, with advertised in-store and online discounts of up to 70 percent off regular prices. Although the pricing strategy seemed to work, since apparel stores enjoyed an above-average bump in sales, the real impact of the discounting will no doubt emerge when quarterly earnings season rolls around.

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