Will Apparel Prices Jump 20% – 30% in 2011? What's the Outlook?

An Investor’s Business Daily article this week suggests we might see apparel prices soaring up to 30% higher in 2011.  Are clothing prices going to skyrocket?  What’s behind the potential inflation in the apparel industry?  Let’s talk about it more now …

Unfortunately, it’s true.  Clothing prices will likely jump in 2011 after over 20 years of stable prices.  Cotton futures, one indication of things to come, peaked at a high earlier this month of $1.12 per pound.  That might not seem high, except if you compare it with a price of about 70 cents per pound in February which amounts to about a 40% increase in cotton.  In addition, the cost of labor in China is estimated to be about 20% to 25% higher and shipping costs are up too.

It’s also true that many companies will try to hold off or forestall price increases to consumers.  Some companies will probably change their product mix as well – adding synthetics such as acrylic and polyester in place of the more expensive cotton products.  Note that synthetics are hydrocarbon-based and their prices have increased too.  Bottom line, there still seems to be solid evidence that consumers will see higher clothing prices in 2011.

Why has the price of cotton risen so much, so quickly?  There are several factors.  One is the weak dollar.  Readers of this blog know that a weak dollar is not a prescription for a strong economy or economic growth.  A weak dollar means we pay more for commodities like cotton.  Additional factors include the strong demand for cotton in emerging economies in Asia and the lack of larger cotton crops in the U.S.

Overall, it’s probably safe to expect cotton products to be up substantially in 2011.  Other apparel will likely rise as well, although possibly at levels more moderate.

America needs a pro-economic growth policy that includes lower taxes and reduced government spending as well as a strong dollar policy and a discontinuation of the qualitative easing policy that tends to create inflation.

A special note.  According to the Investor’s Business Daily article, rising cotton-based goods will not likely make a big dent in the 2011 inflation data because of the way the Consumer Price Index is calculated.  IBD states: “The CPI process of substitution assures that cotton goods will lose weighting in the index as prices rise.”

Choosing the Good Life Blog by Gerard Francis Lameiro, Ph.D.

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