Horns of inflation may sound in the fashion business

With the new season coming on their heels and the last

data on consumer confidence, sales and expectations for the next months being just released, the FashionUnited Top 100 Index resembles the ups and downs portrayed in the international markets. If the index has being continuously climbing since one week ago, when it conquered the 1,000 points landmark, yesterday´s closure brought a drop of 28.89 points, which sent the selective down to a final 1069.58.

Also corporate results are shaking the quoted apparel companies all over the world, as it was seen yesterday with Polo Ralph Lauren, as the company experienced devaluation up to the 2.94% after unveiling their quarterly figures: the rise to $121m, or $1.21 per share, compared with $77m, or $0.76 per share, shown in the same quarter last year has not been enough to lift the company performance.

As the previous days, Japanese companies were leading the index performance. United Arrows, Sanei International and Asics Corporation formed the Nippon winning team in a sweet moment for the Chines-Japanese commercial relations within the clothing market. Once more, the exception was Fast Retailing, with a drop of 20 points.

At the other side of the Pacific, Americans remained reluctant to spend at stores in July, especially on pricier items like jewelry. Good sample of this foot-dragging was Tiffany´s and Co, falling more than 3% yesterday. However, Luxury good market is resisting as proved Hermés, Dior and LVMH, all of them noticing increments.

The figures from MasterCard Advisors' SpendingPulse, which include transactions in all forms including cash, signal that spending remains choppy as shoppers grapple with non seen up to the date unemployment rates and tight credit. In words of Richard Noll, chairman and chief executive officer of Hanesbrands Inc., “the era of apparel deflation is now over”. The experienced executive warns all those belonging to this industry, as life is getting more expensive in the fashion world, and consumers could get stuck with some of the bill.

In that vein, selling in retail shares dragged the UK's FTSE 100 Index down 10.32 points to 5386.16, while retail sales in the eurozone stagnated in June after a revised 0.4% growth in May, according to a release from Eurostat.

Always a loyal indicator of the apparel market health, Cotton prices are up more than 50 percent from a year ago, labor and transportation expenses are raising and factories that closed during the recession remain dark, keeping a cap on supply as demand perks up. To top it off, Chinese officials have become more willing to allow the yuan to appreciate against the dollar, which could make goods made in the country even more expensive.

In the meanwhile, Credit Suisse has cautioned in Australia that the apparel sector is likely to remain tough until the end of summer and stores were likely to under perform the broader retail market for the rest of the year.

Finally, and as the most positive fact of Wednesday, the back-to-school season is retailers' second-biggest after Christmas. And with confidence in the economic recovery stalling, they're in a tough fight for shoppers' budgets.