Discount Duds A Mixed Blessing

Among items whose price behavior have helped keep inflation at bay in recent years, apparel is clearly a standout. America's clothing prices have been trending down steadily since the start of last year (chart).

Margaret M. Cannella of Citibank says changes in consumer demographics and clothing retailing are sparking the slump. For one thing, a drop in the number of women entering the workforce has pounded specialty apparel shops, which catered to their needs for high-priced wardrobes. After rising nearly 11% from 1985 to 1990, the number of employed women between the ages of 25 and 34 has fallen by some 3.6% over the past five years.

At the same time, giant discount and department store chains have been aggressively expanding their apparel departments, gobbling up an increasing share of clothing sales at the expense of smaller retailers and specialty shops. The upshot has been rising supply in the face of slowing demand growth and the eruption of heavy price-discounting and promotional efforts to bring inventories in line with demand. Many U.S. retailers are also merging and closing stores. All of which suggests that apparel prices will remain subdued for some time to come.