US wholesale prices fall in April despite tariffs, biggest drop in five years
US wholesale prices
fell unexpectedly in April, marking their first monthly decline in over a year, despite sweeping import tariffs introduced by President Donald Trump. The decline comes as a surprise to economists who had anticipated a modest increase.
The
producer price index
(PPI) — which measures inflation at the wholesale level before it reaches consumers — dropped 0.5% from March, the largest monthly decline since 2020 and the first since October 2023, the US Labour Department reported Thursday. Year-over-year, producer prices were up 2.4%, down from a 3.4% annual increase in March, AP reported.
Excluding food and energy, core wholesale prices fell 0.4% month-over-month and were 3.1% higher than a year ago.
A sharp 0.7% drop in services prices — the steepest decline since government record-keeping began in 2009 — played a key role in pulling down the overall index. The decline reflected falling profit margins at wholesalers and retailers. Meanwhile, wholesale food prices dropped 1%, and egg prices plunged 39%, though they remain nearly 45% higher than a year ago due to lingering effects of bird flu outbreaks.
Earlier this week, the Labour Department also reported a softening in consumer inflation, with the Consumer Price Index (CPI) rising just 2.3% year-over-year in April — the smallest increase in over four years.
Many economists had expected Trump's tariffs to exert upward pressure on prices. However, the full effect may be delayed. Some analysts believe the impact could begin to show in economic data by June or July, particularly if trade tensions escalate again.
Trump's tariff policy continues to evolve, making it difficult to assess the long-term economic implications. On Monday, in a surprising move, the administration significantly de-escalated the trade conflict with China by reducing tariffs on Chinese goods from 145% to 30%. In response, China lowered its retaliatory tariffs on US products from 125% to 10%.
"Tariffs have yet to make much of a mark on pricing, though it's likely just a matter of time," said Sal Guatieri, senior economist at BMO Capital Markets, in a research note.
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