Inflation hits fashion and from every angle – WWD

Fashion isn’t really driving inflation in the US, but that doesn’t mean the still-fragile industry won’t continue to feel the pinch of higher prices.

The Labor Department’s August reading of economy-wide prices found that clothing, shoes, jewelry and other similar goods saw prices rise 5.1 percent from a year earlier.

That’s a remarkable performance in a generally deflationary industry, which accounts for 2.4 percent of consumer spending, according to the Consumer Price Index’s “relative importance” factor.

However, this growth was much slower than the 8.3 percent growth seen across the broader economy, where food prices account for 13.5 percent of spending and rose 11.4 percent. Energy costs are 8.8 percent of expenses and increased by 23.8 percent in August.

The hikes — fueled by Russia’s war against Ukraine and pandemic supply chain stocks — are forcing consumers to make tough choices and prompting the Federal Reserve to raise interest rates to cool the economy, even at the cost of recession.

Meanwhile, fashion and retail have been hit from almost every side.

It costs more to buy goods, ship inventory and borrow, consumers are stressed and investors are growing more frantic, staying away from any kind of uncertainty.

Wall Street was looking for signs of relief and instead got almost a promise of more interest rate hikes as the Fed is seen as certain to continue making it more expensive to borrow money to lower prices.

The Dow Jones Industrial Average fell sharply on Tuesday, losing 3.9 percent, or 1,276.37 points, to close at 31,104.97.

Among the fashion decliners were Rent the Runway Inc., down 38.7 percent to $3.02 after unveiling a restructuring that sees it lay off 24 percent of its corporate workforce; RealReal Inc., 14.1 percent to $2.26; Stitch Fix Inc., 13.3 percent to $4.90; G-III Apparel Group, up 10.2 percent to $16.27; Warby Parker Inc., 9 percent to $14.31; Signet Jewelers, 8.5 percent to $58.14 and Farfetch, 7.7 percent to $10.67.

“In addition to falling gas prices, inflation appears to be as hot as ever, meaning the Fed still has a lot of work to do,” said Stephen Stanley, chief economist at Amherst Pierpont Securities.

“We are in a period of white knuckles on the steering wheel, and I wonder if, at some point, financial market participants may begin to question their confidence in the Fed’s ability to quickly bring inflation back under control,” Stanley said. .

And investors may not want to stick with the white-knuckle travel fad.

A new reading of the S&P Global Investment Managers Index found that US investor sentiment is down.

Chris Williamson, executive director at S&P Global Market Intelligence, said: “The vast majority of investors surveyed expect next year to be a year of recession combined with elevated inflation, meaning the global economy and tight monetary policy will act as large continuous drags. on market performance and corporate profits.

“The good news is that any recession is generally expected to be mild and inflation is widely believed to have peaked, but there is clearly a lot of darkness that remains, particularly for consumer discretionary and real estate,” he said.