Deflating the Holiday
Sales deflation in three major gift categories could deflate seasonal exuberance, according to a recent report by accounting and research firm Ernst & Young LLP. According to the company’s recent Quarterly Market Basket report, toys, apparel and consumer electronics are showing signs of deflationary pricing, although there was a slight improvement in apparel prices over last year. The report found that apparel deflation was at -1.6 percent in October, slightly better than the late 2002 index of -1.8 percent. E&J analysts pointed to an improving economy, which has helped retailers rely less on promotions to drive sales. Improved efficiency thanks to technology that helps streamline the markdown and promotion process has also helped. Still, E&J warns that apparel prices are likely to fall again when apparel quotas are eliminated in 2005.
