Are we facing the end of cheap clothing?

As anyone who has to pay energy bills, taxes, fill a car, or pay for private education or healthcare knows, life in the UKis getting more expensive in all kinds of ways.

But there’s always been one thing you can rely on. Clothes are cheap, and getting cheaper. Alongside consumer electronics, anything with a ‘Made in China’ tag – or in many other developing nations, for that matter – just seems to keep falling in price. That’s a key factor in why the consumer price index (CPI) measure of inflation has been so tame in recent years.

Now it looks like cheap clothes may soon become a thing of the past, like cheap food, and cheap petrol. Simon Wolfson, the chief executive of Next, warned that clothes prices may have to rise by up to 5% to offset rising costs from Chinaand Europe. The strong euro and demands for higher prices from Chinese manufacturers mean that “we will begin to see higher costs coming through in spring, summer next year. The way that retailers are going to have to cope with this is to pass the increase on.”

That 5% may not sound like much, but we haven’t seen clothing price inflation in more than 10 years. And once the price of clothes starts going up – well, nothing will be getting cheaper any more.

Of course, Mr Wolfson might be going on the defensive a bit here. Next saw underlying sales fall by 9% in the 13 weeks to April 28. Worse still, sales at its Next Directory internet business – usually a compensatory source of solid growth - fell by 1%. Shares actually rose sharply on the news, but that just shows how negative investors were feeling on the stock.

It’s clear that Next is struggling, even given that retail is a tough sector to be in right now. And with sales growth clearly going to be a problem across the board this year, the focus will turn to preserving profits. By signalling the end of price-cutting, Next is warming up consumers to expect higher prices going forward, and other retailers may be only too glad to follow suit. Believe me, retailers wouldn’t be making a song and dance about rising prices if they thought they could just restrict the pain to their suppliers.

It’s not unlike the banks. With funding getting expensive, they’ve stopped chasing bulk mortgage sales in favour of chasing higher profits on individual mortgages. The same goes for retailers. Now that the overall levels of custom on the high street are likely to fall, they’ll focus on going for more profitable sales, rather than snaring more customers.

But Mr Wolfson’s not the only one talking about inflation. Debenhams last month warned that Chinese suppliers were looking for higher payments too. And I’ve got a lot of sympathy for Mr Wolfson. He spears this pathetic nonsense, bandied about by politicians and pundits alike, that the slowdown is all a matter of ‘confidence’ and ‘perception’. This patronising, ridiculous idea that the public is just a mass of lemmings, who have been scared out of spending by scaremongering headlines, rather than the fact that they’ve got no money.

“It’s not a matter of perception,” says Wolfson to The Times. “The problems with the economy are rooted in reality, higher mortgage bills, food bills, fuel bills, increased taxes. That is not a question of how people feel, but the income they have got to spend.”

The Bank of England can’t give people more income. And cheap credit is not the answer to our current woes – it was the cause of them. The Bank’s best bet is to try to keep prices stable while consumers retrench and rebuild their balance sheets. And for the moment, that means inflation should be the focus, not recession-avoidance.