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The inflation obsession continues – even as the womenswear world continues to struggle for pricing power.
On Tuesday, Wall Street was offering bets on how the Federal Reserve views the economy last month with slightly slower inflation and a smaller banking crisis.
Before the collapse of Silicon Valley Bank last week, as depositors rushed to withdraw their money and the government had to intervene, Fed Chairman Jerome Powell signaled the need for more aggressive interest rates to fight inflation.
For now, the thinking among Fed watchers is that rates are likely to stand still or to rise slightly when the Fed Committee, which sets benchmark interest rates, meets again on March 21 and 22.
“The Fed’s next move in March will depend on the banking system and financial markets remaining stable until next Wednesday,” said Stephen Stanley, chief U.S. economist at Santander. “If they do, it’s a compelling case for another rate hike. Of course, if this banking crisis passes, we’ll be back to the old thinking process from the Fed’s perspective — although the assumption of a 50 basis point hike may be off the table now, in March and the balance. Velocity cycle. Next Wednesday where It’s too early to say for sure if we will.”
Last year, the Fed raised interest rates eight times, from 4.25 to 4.50 percent, up from 0.25 percent to 0.5 percent — the biggest jump in a short period of time.
Wall Street loathes higher interest rates because they make it more expensive to borrow money to trade, so any hope of avoiding more hikes will be welcomed by investors.
The Dow Jones industrial average rose 1.1 percent, or 336.26 points, to 32,155.40 on Tuesday, as retail trade fell sharply as banking woes fueled consumer concerns on Monday. Among the fashion losers on Tuesday, Abercrombie & Fitch Co. rose 4.6 percent to $26.79. Oxford Industries 4.5 percent to $114.08; American Eagle Outfitters Inc., up 3.6 percent to $13.24; Holdings, up 3.6 percent to $20.97, and Canada Goose Holdings Inc., up 2.9 percent to $17.89.
Although the market is up slightly, the picture is bleak – and Tuesday’s inflation figures didn’t help. As the industry recovers from the Covid-19 downturn, masking long-term weakness, recent gains have been a different story for apparel.
In February, women’s clothing prices rose 3.8 percent from a year earlier, men’s clothing rose 2.2 percent, shoes 0.8 percent, and watches and jewelry rose 8.4 percent, according to the U.S. Labor Department.
Even with these increases, much of the industry lagged the broader economy, with the consumer price index for goods rising to 6 percent last month from a 6.4 percent increase in January.
All this makes consumers feel stressed.
“Prices are still heating up and hitting consumers in the pocket,” said Neil Sanders, managing director of GlobalData.
While headline inflation has grown at a slower pace since September, prices are still up 14.4 percent over two years, Saunders noted.
“Households are still exhibiting inflation-stimulating behaviours, including reducing the amount of non-essential products they buy and trading in cheaper brands,” he said. “As a coping mechanism, consumers continue to increase their credit card balances and reduce savings while trying to maintain their standard of living and quality of life.
Indeed, according to Walmart Inc. Consumers should choose food over fashion, he said.
While many apparel players, such as Ralph Lauren and Michael Kors, have sought to raise prices by emphasizing brand and high-end positioning, the category as a whole has had trouble establishing pricing power.
Over the past 20 years, prices for women’s clothing have decreased by 0.4 percent, footwear by 21.5 percent, watches and jewelry by 52.6 percent, and inflation by 64.3 percent across all goods.
That weakness among women translates into efficient supply chains, low trade barriers, fast fashion and rising prices, among others. But fashion shows it still has some work to do to win hearts, minds and wallets.
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