June 21, 2012

The Cost of Womens Clothing and Inflation (or Deflation)

Over time generally you can expect costs to go up due to inflation.   However, not all goods see increases in prices over time.   Televisions for example keep dropping in price.    Another example of lower prices can be found in apparel items.   Clothing has dropped in price gradually over the past couple decades.   The BLS Consumer Price Indexes tracks prices for many general product categories.  

Here is the trend for the past couple decades for the 'womens apparel' general category:

That is seasonally adjusted data using 1982-84 as baseline 100 index value.   The BLS will adjust figures based on regular seasonal fluctuations in prices.   To help understand what that means, lets look at the unadjusted raw numbers:

As you can see from this graph it gives a nice illustration of how the cost of womens apparel goes up and down regularly based on seasonal cycles.   The prices for apparel go up in the fall and down in the winter then up in the spring then down in the summer.   Up and down up and down over every year. This is a regular repeating pattern we see in the above chart.   The BLS has observed this seasonal cycle and then figures how much the prices vary based on just the season of the year.  Once the impact of the seasonal cycle is determined they can add or subtract that difference to obtain the seasonally adjusted prices.

As you can see from both graphs, the prices for womens apparel has been on a downward trend for the past 20 years.   From 1992 to 2011 the price index dropped from 129 to 109 or down about 15.5%.   Just last year the prices started to go back up.    From May '11 to May '12 the prices have gone up about 5.4%.

Going back even further we can see a longer trend.   The BLS has data on the womens apparel price index to at least 1978.  Here's the seasonally adjusted data from 1978 to May 2012:

That shows us that the deflation of apparel prices are a more recent trend.  From 1978 to 1991 the prices were on a clear upward trend.   Only around 1992 did the deflation start.

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