Apparel Prices Rise in June—Even as Inflation Dips

Inflation may have cooled in June, but apparel pricing didn’t follow the same trend.

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The U.S. Bureau of Labor Statistics on Thursday said the Consumer Price Index (CPI) slipped 0.1 percent last month, aided by a 3.8 percent decline in gasoline prices. That didn’t help apparel, which actually saw prices rise by 0.1 percent after falling 0.3 percent in May.

Sarah House and Michael Pugliese, economists at Wells Fargo, said in a report that June’s CPI was the “most encouraging one” for the Fed since it began its inflation fight about two-and-a-half years ago. Excluding food and energy prices, core CPI rose by just 0.1 percent, the smallest increase since January 2021. Following Thursday’s CPI report, there’s now increasing speculation that a federal funds rate cut could occur as early as September.

The latest data isn’t likely an aberration, either.

House and Pugliese said inflation has shown signs of cooling in recent months, alongside a deceleration in employment and rise in the unemployment rate. The two predicted that a 25-basis-point cut could take place in September, followed by another quarter-point reduction in December.

Federal Reserve chairman Jerome Powell said on Tuesday in testimony to the Senate Banking Committee that while he’s not yet confident enough to conclude that inflation has receded, he did emphasize that “progress” has been made.

The Fed has long had an inflation target of 2 percent. The current range is between 5.25 percent to 5.50 percent, representing a more-than-two-decade high that has persisted about a year.

The easing of gas prices is expected to help with in-store visits now that consumers have more discretionary dollars in their pockets. And that could be good news for parents—and retailers—who already started to shop for back-to-school (BTS).

A study from commercial real estate firm JLL found that some parents plan to start shopping in July, although one-quarter said June was their starting month. Retail trade group National Retail Federation (NRF) on Thursday released the results of its latest annual survey with Proper Insights & Analytics that showed as of early July, more than half (55 percent) of BTS and back to-college shoppers have already started buying what they need for the upcoming school year.

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Families with children in elementary through high school plan to spend $874.68 on apparel, shoes, school supplies and electronics, or $15 less than last year. Apparel spending is expected to average $253.29, with footwear totaling $170.43. Online is the most popular destination for shopping at 57 percent, followed by department stores, 50 percent, discount stores, 47 percent and apparel stores, 42 percent.

College students and their families are expected to spend an average of $1,364.75, in line with last year’s spend of $1,366.95. The forecast for average spend for this group is $171.06 for apparel and $112.60 for shoes.

Total BTS spending is expected to reach $38.8 billion, comprised in part of $11.2 billion for apparel and $7.6 billion for shoes. In contrast, total back-to-college spending is likely to reach $86.6 billion, which includes $10.9 billion for apparel and $7.1 billion for shoes.

“Regardless of how it is defined, consumers are looking for value even if the impacts of inflation are less pronounced than the previous two BTS seasons. As consumers look for value, they are increasingly less loyal to individual retailers and open to finding value anywhere,” Matt Pavich, senior director of strategy and innovation for price optimization software firm Revionics, said. “Clearance is an often-overlooked element of BTS pricing strategy, but it can be the difference for retailers between a highly successful and a poor-performing BTS period.”

Pavich also said that because parents and their kids are in stores trying on apparel, the season can be a “great opportunity for retailers to drive traffic and adopt strategies to increase basket sizes during those shopping trips.”

The BTS is often considered the season to watch to get an early read on the upcoming holiday season—and it may be even more important than once thought.

Nikki Baird, vice president of strategy and product at Aptos, said the BTS period gives retailers a chance to nurture consumer trust and deliver on store expectations. “If retailers deliver a subpar experience during the BTS season, it will negatively impact their standing when consumers consider their holiday shopping plans,” she concluded.

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