An improving economy, bright colours and prints and popular new fashions proved irresistible to consumers this spring, according to the latest Quarterly Market Basket report from Ernst & Young LLP.

Fashion in department stores sold at full mark-up or with only marginal discounts, which helped turn apparel's five-year deflationary spiral (down eight per cent from May 1999 to May 2004), into a slight up tick (rising 0.7 per cent from May 2003 to May 2004).

Women's and girl's apparel showed the greatest gains, followed by men's and boy's clothing; infants' and toddlers' apparel remained deflationary.

"Rising import prices, due to the weakness of the dollar, also influenced apparel inflation," says Jay McIntosh, Americas director of retail and consumer products, Ernst & Young.

"We've seen this in imports coming from Latin America, Canada, and the European Union, and, more recently, in price increases from Asia."

According to McIntosh, even though most retailers have streamlined their supply chains, making them less vulnerable to wholesale price increases, most will opt to raise prices and increase profitability.

"While retailers may be able to increase margins, it's doubtful that consumers will continue to buy at full price simply because they've become used to a highly promotional retail environment.

"However, if fashions are popular, the economy remains strong and job creation continues, the degree of promotional pricing at retail will decline."