As we mentioned in class, the inflation rate measured by CPI and GDP deflator is usually different because of several factors, one of which is the price of imported consumer goods. It is included in CPI, but excluded from GDP deflator. We used oil as an example in class, but apparel is also another typical example since most of the United States clothing today is imported from China, India, Vietnam, Bangladesh, etc. As the prices of these goods increases, the CPI will then be greater than GDP deflator (probably not that noticeable because clothing consumption only takes up a small percentage).
In this article, it is reported that 2013 “was the third consecutive year [since 2011] that apparel prices increased”, which is 0.6 percent. In fact, for a long period, the United States apparel industries suffered from the inexpensive imports from the world’s largest exporter, China, which results in cheaper clothing prices, allowing consumers to spend more money on other purchases.
This is pretty interesting. When purchasing clothing myself there has definitely been an increase in the price of clothing. The article talks about how some of this increase in price was due to rising price of cotton after India banned it's export, however, now that the price of cotton is down, this cannot be the reason. I agree with the statement about the competition from other countries. While these countries economies become more developed, the price to make clothing there must go up. Good article.
ReplyDeleteAs many of the under developed countries where our clothes were being produced begin to develop there has to be an increase in the prices of these items. This could be a problem now that these goods are not being produced at such a low cost consumers might have to pay more for clothing. Although if these prices continue to rise some of these company's may bring production back to the United States which would bring jobs. But that would not happen for a long time because many of these countries are still producing this clothing at much cheaper price.
ReplyDeleteI agree with Collin in that the production may fall back to the United States eventually when production/transportation costs exceed profit, but I believe the production could shift elsewhere as well. As these economies rise, I believe firms are already in search of a cheaper opportunity for production. Initial investment started while these economies were smaller, still emerging and had high risks. Firms will move to where production is cheapest, which is sometimes back to the home country, or to a new location. With this cycle, I can't see that the price of clothing will rise at the % for an extended amount of time (10+ years).
ReplyDeleteI agree with both Colin and Hannah. However, I don't believe that production will fall to the U.S. for a long time; because, as Hannah said, these companies are going to look to other countries to cheaply produce there goods. Another thing to look at is the wage difference between countries. Companies will look to outsource production because the wages are higher in the U.S. then in other developing countries, which gives them such better profits.
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