The US fashion market faces a gloomy 12 to 18 months, according to credit agency Moody’s.

In a report, Moody’s attributes its pessimistic outlook to the country’s troubled housing market, rising inflation and a lack of wage increases.

The credit agency said that high levels of consumer spending before the downturn mean that consumers’ appetites for clothing have reached saturation point.

“After several years of healthy spending on clothing, many consumers may now view their closets as full enough, which would further moderate demand for a period of time,” it said.

Moody’s said the difficult economic environment has forced retailers to cut margins. Fashion brands facing falling demand have had to clear stock by making big price cuts.

MHE Retail chairman Edward Whitefield echoed Moody’s gloom. He said: “I think the whole of 2008 and the first half of 2009 is going to be difficult. The upturn will not occur until the middle to the end of 2009.”

Whitefield believed the US luxury market will suffer in the downturn. “I think it’s very susceptible to the economy,” he said. “It’s clear that brands such as Gucci and Louis Vuitton could be suffering like-for-like declines.” However, he thought discount retailers such as Wal-Mart and Target will benefit.

Moody’s also expects further consolidation in the US fashion and retail markets. It said: “We believe the industry as a whole will continue to consolidate. As retailers consolidate, improved scale is necessary for apparel companies to maintain relevance with their customers.”

Last week, Gap chief financial officer Sabrina Simmons said: “Our traffic patterns and sales continue to be challenging.”

The fashion retailer reported a 1 per cent increase in group sales to US$1.1 billion (£564.3 million) for the 4 weeks to May 3, compared with the same period last year when the retailer suffered a 14 per cent fall in sales.