The trend toward excessively casual clothing does reflect a declining morality because so often "casual" equals "deliberately revealing." When women are bouncing around with no bras, nipples sticking up, when skirts are so short that a crotch shot is likely, when shorts are so short that the lower half of one's butt hangs down, when men wear bike shorts so tight that one can see their religion, this is not just casual, relaxed clothing; this is a deliberate effort to display one's sexual equipment. And that is definitely due to a declining morality. It's hard to argue that a woman who is walking around on the street or in church with her breasts falling out of an insubstantial top or a man with his shirt off inappropriately is being moral in that environment.
Believe it or not, I agree. Those behaviors are at least reflective of bad taste and bad manners, manners being akin to appropriateness in a given environment (though the argument for that involves a fair degree of relativism). My argument is not that sexually provocative dress is not immoral, but that the increased trend toward casual dress is a matter of morality.
I was going to post something along these lines, but you said it so well. The relaxed clothing is really an expression of relaxed morals and lack of consideration for other people. "Constraint" in clothing and "appropriateness" in clothing (context and purpose are important) translate into the same attitudes in treating other people. I've nothing against beachwear or gym wear, as long as it's on the beach or in the gym.