Hard data suggests tariff-driven inflation and recession fears may be overblown

Axios

15-05-2025

With major indicators from April — the month of peak tariff uncertainty — now in, none show the kinds of recessionary or inflationary conditions implied by business and consumer surveys.
Why it matters: Warnings and anecdotes are taking on greater importance as signs of how tariffs are working their way through the economy.
The big picture: New data out Thursday showed steady retail sales and a surprising drop in wholesale prices in April. So far, so good.
But also Thursday morning, the country's largest retailer warned that it will not be able to absorb tariff-related price increases — even considering the trade war pullback announced earlier this week.
Walmart, known for its low prices, will pass some of those costs onto the consumer. If Walmart can't hold the line, it's hard to see how other retailers might be able to.
What they're saying:"We're wired for everyday low prices, but the magnitude of these increases is more than any retailer can absorb," Walmart CFO John David Rainey told CNBC on Thursday.
"It's more than any supplier can absorb. And so I'm concerned that consumer is going to start seeing higher prices. You'll begin to see that, likely towards the tail end of this month, and then certainly much more in June."
By the numbers: Retail sales rose by 0.1% in April, after a massive spending surge that was even stronger than initially reported. The control group, used to calculate personal consumption expenditures in GDP, fell by 0.2%.
Retail sales rose by 1.7% in March, revised up by 0.2 percentage point. It was the biggest gain in two years as consumers rushed to purchase autos and other goods before tariff-related price increases.
The result was a pullback in most goods categories this month. Even so, there is some evidence that spending on services kept pace. Spending at restaurants and bars, among the few service-sector categories in the retail sales report, rose by 1.2% in April.
Between the lines: The Producer Price Index, a gauge of wholesale prices, showed little sign of tariff-related price pressures that businesses have warned about.
PPI fell by 0.5% in April after a flat reading in March, rounding out an upbeat inflation snapshot after the index's consumer counterpart released Tuesday.
Goods prices were flat last month after falling almost a full percentage point in March. Services prices fell by 0.7%, the biggest drop since the index began in 2009.
The bottom line:"There is little evidence, so far, that tariffs are inflationary and instead profit margins are being squeezed. But as Walmart suggested Thursday morning, that is a situation that may not last long," ING chief international economist James Knightley wrote in a note.