I just read an article that said that the drop in clothing prices had a major role in lowering core inflation. Huh? What does clothing prices have to do with inflation? I’m not an economist and never really paid attention to this concept called “inflation” - which by the way, I think is something made up by the government in order to collect more taxes from us. Everything is going up - gas prices, housing, food - everything! And for what reason? The war?
All I know is that the reason clothing prices dropped is because there's so much competition in the apparel industry nowadays. Every day there's a new boutique opening, a celebrity has come out with a new line of clothing, and clothing brands just keep growing. Will it ever end?
If someone out there can enlighten me on this whole clothing and inflation thing, I would definitely appreciate it!
Alright, first, inflation is not made up by the government.;)
Inflation is a rise in the average price level of an economy. When inflation happens, the purchasing power of the money you have decreases. It is a real and ongoing phenomenon. It is in our best interest to have the Federal Reserve and our government acting in ways that keep inflation at a low, steady rate. You can't eliminate it completely, because there is a tradeoff between productivity/economic growth and low inflation.
One way economists measure inflation is by looking at the Consumer Price Index, or CPI. They consider the change in the prices of a "basket" (just a word used for "selection") of certain goods and services that most everybody buys.
Because certain goods and services that the typical consumer in our economy buys have prices which are very volatile--think gas and food, for example--these are excluded from what is sometimes a more accurate measure of inflation called "core inflation." By looking at "core inflation," you can see how the economy is doing in terms of inflation when the effect of energy prices is taken away.
I honestly do not know what the impact of clothing prices increasing would have on the economy as a whole. I think it is interesting to look at international trade agreements concerning textiles and apparel as those impact the prices we pay as consumers for goods (or the markup we pay..:p). There will always be expensive clothing out there; even the haute couture business survived during the German takeover of France in WWII.
Are you suggesting that prices in fashion have increased? That a dollar today buys less in terms of fashion goods than a dollar a few years ago? If that is the case, I think we could attribute that in part to the dollar/euro exchange rate...at least if we're talking about European designer fashion goods...
Good question in any case.
Posted by: Elsa | August 25, 2006 12:22 PM | Permalink to Comment