According to the commerce department apparel and accessories sale increased 1.3 percent on a seasonally adjusted basis in June to $14.7 billion. Retail sales got a boost in June as retailers turned up the discount volume to clear off shelves for back-to-school merchandise, according to economists. Compared with June 2002, sales in the sector rose 2.9 percent.

A lot of this has been driven by heavy price discounting, said Steve Spiwak, an economist at Retail Forward. Summer apparel inventories piled up on store shelves so you are seeing apparel retailers and department stores slash prices to clear inventories to make room for back-to-school merchandise. Spiwak said the discounting had a positive impact on a monthly basis but not on a year-over-year basis. Sales growth slowed against a year ago due primarily to cooler than expected weather in June, he said.

Carl Steidtmann, chief economist at Deloitte Research, said a
relatively soft spring led to more discounting though he stressed that inventory levels were not out of line by historical standards. Department store sales, excluding leased departments, increased slightly by 0.2 percent to $18.05 billion in June but fell sharply by 5 percent against a year ago. Sales at general merchandise stores, which include department stores and discounters, rose 0.3 percent last month to $39.07 billion and increased 2.4 percent against June 2002. There is a severe deflation in prices at department stores, which are down 3 percent against a year ago
and that certainly drags down sales, said Steidtmann. Department stores are also clearly losing market share to more value-oriented businesses and specialty stores.

Both economists said newly passed tax cuts should help strengthen consumer confidence in July and August though rising unemployment could put a damper on spending.