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Fashionistas Take a Hit in the Wallet

By Anne Kates Smith, Senior Associate Editor, Kiplinger's Personal Finance, Source: Kiplinger Consumer News Service

Like countless teens, Olivia Smith of Bethesda, Md., spends the lion's share of her allowance on clothing. She may have to do some extra chores next year, as higher production costs threaten to make fashion statements more expensive.

For decades, apparel has claimed an ever-smaller share of our pocketbooks relative to other expenses. For the ten-year period through 2009, consumer prices overall rose 29%, but apparel prices declined 8.6%. "That will change in 2011," says retail analyst Eric Beder, of Brean Murray Carret & Co.

Manufacturers are getting squeezed by higher cotton prices, increased transportation costs and upward pressure on wages in China, where so much of what we wear is made. Retailers are expecting to pay more for merchandise, and it won't be long before some of those hikes are passed along to customers, says Beder. "The age of deflation for apparel is done, and it's not going to come back anytime soon."

Markups are likely to remain in the single digits, percentage-wise -- $1 more for a $20 graphic T-shirt, for example. You may not even notice the increase, with pricing changes masked by a change in seasons or the launch of a new trend -- a shift from clean denim to distressed denim, for example.

Retailers selling low-cost basics, from underwear to khakis, will be least able to pass on increases. Instead, shoppers should be on the lookout for a decline in quality.

All contents copyright 2008 The Kiplinger Washington Editors, Inc.