In April, wholesale prices experienced their most significant drop since the early days of the pandemic, coinciding with Trump’s ongoing trade war.
The Producer Price Index (PPI), which tracks wholesale inflation, decreased by 0.5% from March to April. This marks the largest monthly decline since April 2020, just after the pandemic led to widespread economic shutdowns.
Year-over-year, the PPI rose by 2.4% in April, the lowest increase since last September, according to the Labor Ministry. When excluding food and energy, the PPI fell by 0.1%, with a year-on-year increase of 2.9% noted.
Economists pointed out that shrinking profit margins are linked to these lower prices.
Kathy Bossjeansick, an economist, stated that two-thirds of the decline was linked to reduced demand in the final trade services, which dipped by 1.6%. Additionally, over 40% of this drop was attributed to a 6.1% reduction in the wholesale margins for machinery and vehicles.
This trend aligns with a recent decrease in retail inflation. The Consumer Price Index (CPI) fell from a 2.4% annual increase in March to a 2.3% rise in April.
Companies have warned that Trump’s trade war could lead to higher inflation, although these price hikes have not yet materialized.
Retail giant Walmart announced it would raise prices this summer due to increased costs from the trade war. John David Rainey, Walmart’s CFO, remarked on the unprecedented scale and speed of incoming price changes.
Economists monitored the recent downward price trend with interest.
“The wholesale inflation numbers indicate that inflation appears to be cooling,” noted Elizabeth Renter, a senior economist at Nerd Wallet, in her analysis.
Eugenio Aleman, chief economist at Raymond James, described the CPI figures as a “positive surprise.”
He added that while today’s report brought unexpected good news, inflation data is likely to remain volatile.
During a meeting, Federal Reserve Chairman Jerome Powell suggested that the U.S. economy might face more frequent supply shocks moving forward.
April’s US retail sales recorded a modest increase of 0.1%, down from a 1.7% rise in March, which aligned with economists’ predictions.
“Even with last month’s increase, retail sales have been relatively strong,” remarked Scott Helfstein, head of strategy at GlobalX.
Looking ahead, economists expect more declines in consumer spending.
Kathy Bossjeansick also predicted further pullbacks in spending as consumers adjust from the prior surge ahead of tariff implementations.
While recent surveys indicate a drop in consumer and business sentiment during Trump’s trade war, unfavorable price data has yet to emerge.
“US sentiment surveys have shown a notable decline recently. However, the actual economic data has remained quite resilient so far,” observed Peter Sidorov and colleagues in a Deutsche Bank analysis.
