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Get ready, here come higher prices for clothes

For shoppers who have come to expect steadily declining clothing and footwear prices, a return to higher inflation will come as a shock


 
(AP Photo/Mark Lennihan)

(AP Photo/Mark Lennihan)

Nothing raises the ire of Canadians quite like the lower prices American shoppers enjoy on the same products south of the border. From cars and coffee makers to shirts and shoes, Canadians have long complained they’re getting gouged. Such sentiment is at the heart of the populist chest-thumping the Harper government has directed against retailers and their suppliers of late.

But here’s a fact often lost in all the gouge-rage: When it comes to clothing and footwear, Canadians might pay more than Americans do today, but they’re paying a lot less than Canadians did a decade ago.

(For best results on mobile, view this chart in landscape mode)

On average, women’s clothing is roughly 15 per cent cheaper than it was in 2004. Across the board, prices are down. Children’s footwear is the only exception, yet even in that category, prices have failed to keep pace with the overall increase in consumer prices, as measured by the core inflation rate, which the Bank of Canada uses to gauge the underlying inflation trend in the economy.

There are a number of reasons why clothing prices have dropped. Cheap imports from the likes of China and other emerging economies is one. That enabled the rise of discount retailers like Joe Fresh, the clothing arm of Loblaws, and others, which strive to offer stylish fashions at rock-bottom prices (in some cases, with horrific consequences.) The high value of the loonie through much of the last decade also made it cheaper for retailers to import finished goods as well as raw materials.

But the era of ever-cheaper apparel appears to be ending.

Buried in Statistics Canada’s consumer price report released Friday is a hint that things are about to change. Even though the cost of clothing fell 2.3 per cent in November from the month before, on a year-over-year basis October and November marked the first time in more than 15 years that clothing prices rose faster than Canada’s core CPI rate for two consecutive months. That might not sound like much, but when you look at the six-month trend in the relationship between clothing prices and the core inflation rate, it’s clear we’re at a turning point.

FOR UPDATED CHART, SEE END OF POST

(For best results on mobile, view this chart in landscape mode)

Just as the Canadian dollar helped keep clothing prices down, the slumping loonie is making it more expensive to import clothes. Stricter safety controls on suppliers after the Bangladesh factory collapse in 2013 may also be leading to tighter margins for discount retailers, just as labourers in China and elsewhere demand higher wages. And while the plunge in the price of oil—a major cost for all manufacturers—might help, it’s unlikely to offset Canada’s weakening currency.

We’re hardly facing runaway inflation here. And the Bank of Canada will likely welcome rising clothing and footwear prices as it grapples with weak inflation. But for shoppers who have come to expect steadily declining clothing prices, a reversal will come as a shock.

 
UPDATE: This chart includes inflation data up to February 2015


 

Get ready, here come higher prices for clothes

  1. Retailers still don’t have room to raise clothing prices. The weaker dollar has not stopped people from buying clothing in the US. I think I’m the only person in my entire workplace to buy clothes in Ottawa. Everyone else goes on regular US shopping weekends. The currency difference has only just exceeded the 13% HST. When you shop in New Hampshire, you pay zero tax and the clothes are way cheaper. And NH is an easy half day drive from almost anywhere in Quebec or Southern & eastern Ontario. A falling C$ will not lead to retailers raising prices because they can’t. What it will lead to, is already leading to, is retailer bankruptcies in Canada. Mexx being the latest, but not the last, example.

    I myself naively thought a lower loonie would help Canadian retailers. All it’s done is raised the wholesale cost of clothing, putting a further squeeze on already squeezed retailers. People will spend money on gas and hotels in search of cheaper merchandise, even if it ends up costing them more overall. Just human nature. Also, you’d be shocked how many people can’t calculate currency conversions to save their life. If the loonie is trading at 80 cents, most people will think they’re spending $1.20 for each USD. Of course, it is $1.25, plus whatever the bank or credit card charges you for the exchange. Good luck trying to explain that to anyone. You can do the math right in front of them (basic division) and they’ll disbelieve it.

    • The cost of socialism, my friend. The US is doing their best to catch up to the Canadians. We will “improve” our wealth distribution before you know it.

      • Has nothing to do with “socialism”. In fact, businesses in the US face higher corporate taxes, and massive healthcare insurance costs for their employees, not to mention higher liability costs for everything. The idea that “socialism” is causing our higher retail prices is 20 years out of date. The higher costs here have to do with insanely high commercial real estate costs (RE did not correct in 2008 in Canada like they did in the lower 48) and ridiculous tariffs charged on many imports. RE will correct in its own time. Tariffs need to be removed through legislation. I’m not holding my breath.

    • Not me, I still buy US. Jeans for example, when visiting relatives $15 in Portland is still cheaper than $45 in Calgary for the IDENTICAL make/model/manufacturer/vendor.

      Its why I have US investment accounts, US credit cards and all. US stock/currency performance is so much better than Canada, I will I moved more out of Canada 16 months ago.

      80 cent loonie need (1.00 / 0.80) $1.25, thats 25% inflation for materials, food, appliances.. yet liars at Stats Canada quote 2% inflation…..

      Ottawa is clearly just deceptive, liars, illusions and crooked. As its really a cumulative inflation tax and devaluation of Canadians. In terms of WORLD currencies Yuan and USD, Canada’s GDP is shrinking and depreciated for bloated crooked governments.

  2. With devalued money and $45 billion in hidden CBSA taxes, tariffs, fees no Americans pay, Canadians get screwed. But media decides to hide it for it would irk our statism polticians to tel the people the whole truth. Just order some cloths from say a US online retail like Lands End. When you get the bill, you will see the tax and fee greed.

    Isn’t just clothes, up to a 234% tariff on beef, up to 283% tariff on mozzarella cheese, so tax greedy we tax food for protectionism as “families” make huge taxable profits from high costs of food and no competation as its tariffed out. I call it a hidden tax on food.

    Its all about tax greed. Lookup total aggregate taxation from all levels of governance, for Canada its 41% of GDP …. Far higher than US, Mexico, China…. so much so we need uncompetitive wage demands and lose jobs…as we are too busy supporting government bloat. So bad, people pay taxes to support too many govmint kids and uncommon good bailouts, younger generation can’t afford family homes and our own kids.

    But hey, Canadian politics and journalist puppets feed the greed by not telling the truths. Feeding Canadians economic ignorances since birth.

  3. $230 jacket costs:

    $30 GST/PST/HST
    $80 hidden tariffs by CBSA
    $20 trans ship and border fees, mostly CBSA driven
    $35 retail costs, higher than US for employment and other taxes
    $20 shipping, handling for origin country.
    $30 to make it, profit, wages and material.
    $15 profit for international shipping and handling.

    Pretty bad when Bangladesh employers and workers gets $30 for a $230 jacket and most of the costs in a jacket, hidden plus real go to tax greedy governments.

    • I believe DAVE777, that you are spot on. With our outrageous taxes (including 15% HST here in N.S.), companies refusing to compete with US business without the help of an 80 cent loonie, and “now we’ve gotcha marketing boards,” I can’t see anyway we are not going to be taken further to the cleaners in the future.
      The massive socialism costs combine with sky-high pricing caused in great part by huge powerful unions are slowly bringing all tax paying Canadians to their knees.
      Yes, I do believe that clothing, along with everything else, is going to become much more expensive for Canadians. Just wait until the Liberal proposed carbon taxes kick in which will be paid by all of us…

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