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Inflation Looms Over High-End Fashion as Economy Recovers

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Remember in the early-2000s when Balenciaga's circa-$1,000 moto-cross handbags were some of the most expensive in store? In the past two years, we've noticed that, while the prices on Balenciaga's classic styles have held fairly consistent, other brands have aggressively escalated their pricing—so much so that now, on the ground floor of the Barneys flagship on Madison Avenue, Balenciaga's once-intimidatingly priced purses are now some of the least expensive on the selling floor. The $1,000 bag has been outpriced by its $2,000, $4,000, and $10,000 counterparts.

For anyone who's had the disquieting feeling that clothing and accessory prices have been spinning out of control for some time now: Buckle up for a bumpy ride, because inflation's about to kick it up a notch.

“It’s really the higher end where you’re going to have more inflation,” Phillip Swagel, former assistant secretary for economic policy at the Treasury Department told WWD, noting less expensive apparel would continue to benefit from productivity gains in sourcing. “As parts of China and other emerging markets get richer, there’s naturally going to be more demand of high-end apparel, and that should lead to upward pricing pressure.”

While prices are expected to stay on the level for the remainder of 2010, look for increases in the near future.

The upward swing in prices would mark a stark turnaround from the steady slide in costs that has been the industry norm as retailers and suppliers found ever-less-expensive sources of supply. But with wage pressures rising in China, raw materials prices climbing and demand beginning to recover worldwide from both consumers and manufacturers, there is a growing sense deflationary pressures could be easing and its opposite might begin to take hold.
· Inflation vs. Deflation: As Economy Improves, Price Pressures Grow [WWD]