Clothing has the highest inflation since 1995 with a return to consumption and high costs

After putting pressure on products such as food and fuel, inflation reached clothing, footwear and accessories in Brazil.

In the 12 months through May, the most recent period with available data, clothing prices rose by 16.08%, according to the IPCA (National Broad Consumer Price Index), calculated by the IBGE (Brazilian Institute of Geography and Statistics).

This is the highest inflation registered by the sector since July 1995, when the country was experiencing the impacts of the transition to the Real Plan. At the time, clothing registered a high of 18.68% in 12 months.

According to analysts, the current data reflects the high price generated by a combination of supply and demand factors.

Economist Fabio Bentes, from CNC (National Confederation of Trade in Goods, Services and Tourism), recalls that the pandemic caused a mismatch in the production chains that supply raw materials for the industry.

With the scarcity of part of the goods, the manufacturing costs increased, which forced the pass-throughs to the final prices of the clothes.

In a 12-month average through May, the inflation of inputs used in the industry for the manufacture of textile products, clothing articles and leather and footwear articles rose 12.8%, according to a calculation carried out by Bentes, based on data from the IPP ( Producer Price Index), from the IBGE.

This increase has already been greater during the pandemic. Until August 2021, the accumulated increase reached 28.4%.

Another factor that started to pressure the final prices of clothing, says Bentes, was the resumption of consumption with the return of the circulation of consumers in stores.

In the 12 months through April, the most recent period with available data, the volume of retail sales of fabrics, apparel and footwear accumulated a high of 19.4% in Brazil. The sector, however, has not yet overcome all the losses of the pandemic.

It is 8.6% below the pre-crisis level of February 2020, according to data from another IBGE survey, the PMC (Monthly Trade Survey). The survey involves companies with 20 employees or more.

“We had at least two factors of impact on clothing inflation. There was a resumption of consumption, with the recovery of part of the profit margins that had been sacrificed by companies at the beginning of the crisis, and escalation of wholesale prices, “says Bentes.

Only transport has higher inflation

With repressed demand in the early stages of the pandemic, clothing has registered deflation (price drop) for nine consecutive months (May 2020 to January 2021) in the accumulated IPCA.

This scenario was reversed after the lifting of restrictions on store operations.

Among the nine groups of products and services surveyed in the IPCA, the inflation accumulated by clothing (16.08%) was only below the high registered by transport (19.92%) in the 12 months through May.

The advance of transport reflects, above all, the cost of fuels such as gasoline.

“One point that certainly weighs on clothing inflation is the return of face-to-face consumption. Many people still haven’t joined e-commerce to buy clothes”, says economist Thiago de Moraes Moreira, professor at Ibmec-RJ and UFRJ (Universidade Federal of Rio de Janeiro).

“People are back to consuming, and are paying more for it, while retail seeks to recover the financial losses generated by the pandemic”, he adds.

Companies seek to dodge pressure

In addition to the increase in inputs and the return of on-site demand, the rise in The cost of transporting goods and electricity also put pressure on clothing inflation, says businessman Thiago Sitta, 41.

He is a managing partner of Remo Fenut, a social clothing brand with 12 stores in shopping centers and a factory in São Paulo.

“Marine freight, for example, increased five times what it cost before the pandemic. A button used to cost R$ 0.10, now it costs R$ 0.20. There was a shortage of supplies for boxes and bags”, he reports.

To avoid the loss of sales, Sitta says to seek “palliative” measures against inflation.

“For example, we replace a dress shirt with a polo shirt, with a better value, which does not need to be sold at such a high price. We look for alternatives.”

The tightening of profit margins was another reflection of the pressure of costs for entrepreneurs in the sector, points out Aldo Macri, vice president of Sindilojas-SP, which represents around 30 thousand shopkeepers in the capital of São Paulo.

“The trader needs to be flexible. He has to analyze the costs a lot. We learned this in the pandemic”, he says.

According to Edmundo Lima, executive director of Abvtex (Brazilian Association of Textile Retail), store chains have been expanding negotiations with the production chain and are seeking efficiency gains to try to mitigate the effects of the high price. Abvtex represents big names in fashion retail in the country.

“We had a shortage of goods, high energy tariffs. This was producing pressure along the production chain”, he evaluates.

“Retailers have been negotiating with the production chain, they have also assumed this price pressure, but there was no way not to pass on part of the increases”, he adds.

In the view of Fabio Bentes, from CNC, clothing inflation should even lose strength over the second half of the year, in an environment of higher interest rates. However, this slowdown tends to be slow, says the economist.

“There is no longer so much room for clothing inflation to advance. It should wither, but the process is slow.”