Shoes and clothes are getting more expensive — but experts suggest that might just be a good thing for the American economy.
The U.S. Bureau of Labor Statistics reported that the consumer price index — a measure of the change over time in prices paid by consumers for consumer goods and services — increased 4.2% from the prior year. It marked the largest advance for the figure in 12 years — that is, since September 2008, at the start of the last financial crisis — and was much higher than economists’ predictions of a 3.6% rise.
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Still, the Federal Reserve indicated that it has no immediate plans of pulling back on its near-zero interest rates or aggressive pace of asset purchases. According to experts, inflation is often viewed as a natural byproduct of a robust economy — plus, the acceleration was compared to the same time last year, when America was in the throes of battling the COVID-19 pandemic, which understandably led to a lack of demand for goods and services that led to a collapse in overall prices.
“Such a transitory rise in inflation would be consistent with some prior episodes in American history coming out of a pandemic or when the labor market has quickly shifted,” Jared Bernstein and Ernie Tedeschi of the Council of Economic Advisers wrote in a mid-April post on the White House blog.
As for how long this rate of inflation will last, Footwear Distributors and Retailers of America chief economist Gary Raines predicted that the gains in prices could persist well into the fall. This would leave retailers poised to capitalize on the return of shoppers, armed with pent-up demand and fiscal stimulus.
“After several years of flat to declining retail prices for footwear, the latest year-over-year rebound is a tentative sign of higher prices paid by shoppers — and welcome news for retailers,” Raines told FN. “The three rounds of stimulus payments to consumers — capped in recent weeks by the biggest — have left many with extra funds to spend.”
He added, “As people return to school and work and some semblance of normalcy, we suspect shoppers in need of replacement footwear — and with stimulus cash in hand — will not be as price conscious as in the past.”
Aside from the influx of federal dollars, which comes at a time of heightened coronavirus vaccinations and gradual reopenings across the country, a weaker U.S. dollar has driven a surge in commodity prices that impact a range of apparel and footwear materials. What’s more, ongoing port congestions have contributed to supply chain shortages — and experts forecast that this problem could go on past the summer and back-to-school seasons — and maybe as far out as the holidays.
“Huge jumps in freight costs — in some cases four times higher than just a few weeks ago — compounded by the very severe port problems are fueling inflation in the logistics area, which then impacts a range of materials prices,” added American Apparel and Footwear Association president and CEO Steve Lamar. “Unless policymakers step in soon to address the shipping crisis, we will see these inflationary pressures persist, likely tripping up consumers with more expensive footwear.”