Producer prices fell unexpectedly last month, newly released federal pricing data shows.
The U.S. Bureau of Labor Statistics released new pricing data Thursday that showed the Producer Price Index fell 0.5% in April, defying economists’ expectations.
The price decrease comes despite concerns from economists that tariffs could lead to an increase in prices for American consumers. The annual inflation rate for producer prices fell to 2.4%.
“Among final demand goods in April, the index for general purpose machinery and equipment advanced 1.1%,” BLS said.
PPI is divided into two categories, goods and services.
“Prices for residential electric power, fresh and dry vegetables, non-electronic cigarettes, and utility natural gas also moved up. Conversely, the index for chicken eggs dropped 39.4%,” BLS added. “Prices for gasoline, gas fuels, diesel fuel, and primary basic organic chemicals also fell.”
Services saw the biggest drop since PPI data began being tracked in 2009.
“Over 40% of the April decline in the index for final demand services is attributable to margins for machinery and vehicle wholesaling, which dropped 6.1%,” BLS said. “The indexes for portfolio management, food and alcohol wholesaling, system software publishing, traveler accommodation services, and airline passenger services also fell. Conversely, prices for outpatient care (partial) advanced 0.3%. The indexes for furniture retailing and for inpatient care also moved up.”
Ryan Young, senior economist with the Competitive Enterprise Institute, said in a statement provided to The Center Square that there are competing factors affecting inflation: tariffs and lower consumer demand.
“Tariffs are pushing prices up, and slow demand is pushing prices down,” Young said. “Right now, that downward pressure from slower demand is stronger than expected, at least compared to the upward pressure from tariffs.”
While companies are absorbing some of the increased costs of President Donald Trump’s 10% reciprocal tariffs, they can’t absorb all of them.
“For example, the grocery industry averages a 2% margin,” he said. “That is not nearly enough to absorb a 10% tariff, let alone a 145% tariff. On net, tariffs put upward pressure on prices.”
But lower consumer demand is driving prices lower.
“There was a demand spike before the tariffs hit as companies stockpiled as much as they could,” Young said. “The flipside is slower demand after those tariffs come into effect. That is starting to happen now.”
