In a surprising turn, US wholesale prices decreased in April for the first time in over a year, despite President Trump’s sweeping import tariffs.
The Producer Price Index (PPI), which gauges inflation before consumer impact, saw a 0.5% drop from the previous month—this marked the first decline since October 2023 and was the most significant decrease in five years. Year-over-year, producer prices have risen by 2.4% last month, which is a slowdown compared to the 3.4% increase recorded in March, according to a Thursday report from the Labor Ministry.
When you exclude the fluctuating food and energy prices, core wholesale prices fell by 0.4% from March, while still showing a 3.1% increase compared to the previous year.
Economists had anticipated a modest increase in producer prices for April.
Interestingly, service prices dropped by 0.7%, marking the largest decline since the government began tracking these figures in 2009. This contributed to shrinking profit margins for wholesalers and retailers. Wholesale food prices decreased by 1%, with egg prices alone plummeting by 39%, although they’ve increased nearly 45% year-over-year due to bird flu issues.
On Tuesday, the Labor Bureau shared that prices had only risen by 2.3% from April 2024, representing the shallowest increase in over four years.
There’s a prevailing sense among economists that Trump’s tariffs will lead to price hikes, with many suggesting the repercussions might start becoming evident in June or July.
However, with Trump’s tariffs frequently changing, forecasting their economic impact proves challenging. Just this Monday, for instance, Trump unexpectedly made a significant concession in his trade battle with China—reducing tariffs on Chinese goods from 145% to 30%. In turn, China has lowered its retaliatory tariffs on US products from 125% to 10%.
Sal Guatieri, a senior economist at BMO Capital Markets, noted in a commentary, “Taxes haven’t made much of an impact on pricing yet, but it’s likely just a matter of time.”
