US inflation moderated slightly in April compared to March, while apparel prices fell, although for the year prices are still up over 5%.

US apparel retailers saw sales decline by -0.8% month-on-month in April, according to data released by the US Census Bureau, which ends six months of consecutive increases, however, sales still increased by 5.4% compared to the same period a year ago.

Overall retail sales in April were up 0.3% seasonally adjusted from March and up 8.3% year over year. That compares with the much larger increase of 1.2% month-over-month and 6.9% year-over-year in March.

Declining trend versus high prior year comparative

Apparel industry consultant Robert Antoshak tells Just Style exclusively it’s good that inflation moderated in April, however he points out that a single month’s data does not make a trend.

He says: “Perhaps inflation has peaked or it’s just taken a breather. With the unknowns of pandemic lockdowns and the Ukraine war, it’s hard to know if we are at the beginning of a declining trend or not.”

Neil Saunders, managing director of GlobalData takes a different view. He argues the only relief from the inflation numbers is the pace of price increases has not accelerated from the 8.5% yearly rate posted in March. However, he adds that April’s year-over-year rise of 8.3% is still punishingly high and remains a threat to both consumer spending and consumer confidence.

He explains: “It is also the case that inflation first started to really trend up in April 2021, so a high prior year comparative has somewhat dampened the rate this year. On a two-year basis, prices are up 12.8% in April compared to 11.3% in March, which indicates that inflation is still running rampant.”

The US Census Bureau’s data reveals that shelter, food, airline fares, and new vehicles were the largest contributors to the seasonally adjusted all items increase. The food index rose 0.9% over the month as the food at home index rose 1.0%. The energy index declined in April after rising in recent months and the index for gasoline fell 6.1% over the month, offsetting increases in the indexes for natural gas and electricity.

Apparel, however wasn’t the only sector to witness a decline month-on-month in April with communication, used cars and trucks also experiencing decreases.

The all items less food and energy index rose 6.2% over the last 12 months. The energy index rose 30.3% over the last year, and the food index increased 9.4%, the largest 12-month increase since the period ending April 1981.

Saunders points out that one of the central issues is that inflation is hitting hardest in categories that are less discretionary. For example, groceries rose by 10.8%, while gasoline is up by what he describes as a punishing 43.6%. 

He says: “This has two effects. First, it means that inflation is highly visible to consumers who see elevated prices on the shelf edge at supermarkets and at the pumps. Second, it makes inflation very hard to avoid, as cutting volumes of these goods is challenging.”

Falling apparel spend in April suggests the worst effects of US inflation still to come

Saunders also suggests that inflation is not, yet, having a catastrophic effect on the consumer economy.

He argues: “Many households have the firepower of high savings and continue to benefit from a reduction in service spend on things like travel and vacations as pandemic trends have still not completely unwound. However, inflation is hurting those at the bottom and middle of the income spectrum and it is starting to spook consumers across all wage segments. As it does, behaviours are starting to shift.”

He adds: “In our data we are seeing multiple early warning signs. Consumer credit and debt is expanding. Volumes of products purchased, especially in discretionary categories like apparel, is falling. There is a reduced level of impulse buying, especially online. Shoppers are switching where and what they buy, with a focus on trading down to cheaper stores and brands. And more households are looking at budgets and cutting out non-essential spend.”

If inflation persists, these trends will accelerate and will have a generally negative impact on many consumer companies who, at the same time as facing reduced demand, will also feel pressure from an increase in their own cost base.

Unfortunately, our view remains that inflation will not work its way out of the system either quickly or dramatically. Some pressures, such as supply chain constraints, are easing. But others like labour shortages and input costs from raw materials, are not. This means inflation will remain sticky for the foreseeable future and, as it persists, the changes in consumer behavior will become more pronounced.

By Just Style