Credit ratings agency Moody’s has warned of a bleak future for the US clothing industry, with consumers likely to trade down in the wake of gloomy economic conditions.

Moody’s Global Corporate Finance, which gave the US apparel sector a moderately negative outlook in May based on rising retail consolidation, said the erosion in discretionary consumer spending over the past six months is a “rising headwind” against the sector.

The agency said: “Amid this difficult economic environment, price and value will be key considerations for the consumer, who may be more likely to trade down to moderately priced retailers such as Target and Kohl’s.”

Moody’s did not expect resilient higher income consumers to be “immune to these moderating trends”.

It added that the weather could prove “just as problematic” in the near term, because unseasonably warm autumn weather has led to pressure on stock levels.

Pent-up demand may help relieve the situation, but Moody’s expected that high levels of promotion over the holiday season would hit margins.

Moody’s did not expect the situation to improve as food and petrol prices continue to rise and the US dollar falls.

The agency has reported twice as many negative ratings as positive ones over the past six months, including the downgrading of Liz Claiborne, Jones Apparel and Kellwood.