Oversupply, Tepid Demand Drive Apparel Prices Lower in October

Inflation edged up slightly in October, according to the most recent consumer price index (CPI) data released by the U.S. Bureau of Labor Statistics, but apparel prices continued to deteriorate, a result of oversupply and tepid consumer demand.

The overall CPI rose by 0.2% last month compared to October 2014, as sharp declines in gasoline prices were offset by increases in food, shelter, medical care and other nondiscretionary goods and services. The core inflation rate, which excludes food and energy, rose by 1.9%, due primarily to increases in housing and medicine costs. 

The combined apparel and footwear price index fell by 1.9%, however, its twelfth straight month of decline.

CPI1

The index for clothing, also in its twelfth straight month of decline, dropped by 2.2%. Footwear prices edged down by 0.9% in the month, the second decrease since June 2014.

CPI2

A 2.7% drop in prices of women’s apparel, the largest segment in the market, played the biggest role in the price erosion in the apparel category. Men’s apparel prices dropped by 1.1%. 

CPI3

While boys’ apparel prices declined by 1.3%, prices of girls’ clothing plunged by 7.7%. Infants’ and toddlers’ prices were the only bright spot, rising the most of any category in the month, by 3.4%.

CPI4

Traditional apparel retailers continue to be impacted by the “three Os”—off-price, outlet and online—which, together with the expansion of fast fashion brands are driving the oversupply and lowering the average selling price of apparel. Macy’s, Nordstrom and HBC are rolling out Backstage, Rack and Off Fifth faster than full-line concepts, and H&M, Primark and Forever 21 keep enlarging their U.S. footprint. It is unlikely that the deflationary trend will reverse course unless consumer demand starts to pick up dramatically.

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