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American Focus > Blog > Economy > US producer prices tumble in April as tariffs squeeze profit margins
Economy

US producer prices tumble in April as tariffs squeeze profit margins

Last updated: May 15, 2025 9:56 am
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US producer prices tumble in April as tariffs squeeze profit margins
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Stay Updated on US Inflation Trends

Sign up for the US inflation myFT Digest to receive free updates directly to your inbox. Stay informed on the latest developments in the US economy, including changes in wholesale prices, consumer price index, and more.

In April, US wholesale prices experienced the most significant drop in five years, signaling a historic decline in profit margins. Despite the imposition of higher tariffs by the Trump administration, businesses have been hesitant to pass on these costs to consumers. The producer price index fell by 0.5% month-on-month, the largest decrease since April 2020. Economists had anticipated a 0.2% increase, making this unexpected drop a cause for concern.

The core PPI, which excludes volatile food and energy prices, also saw a significant decline of 0.4%, the largest since 2015. Year-on-year increases in both headline and core PPI eased to 2.4% and 3.1%, respectively. This data indicates that businesses are absorbing the impact of tariffs on their profit margins rather than passing it on to consumers.

The drop in PPI was largely attributed to a 0.7% decrease in services prices, the most significant monthly drop since the index’s inception in 2009. A substantial portion of this decline was linked to margins for final demand trade services, highlighting the squeeze on profit margins faced by wholesalers and retailers.

Economists are closely monitoring inflation indicators to assess the effects of tariffs on the US economy. While the recent data suggests limited inflationary pressure, the looming impact of tariffs remains a concern. Retail giant Walmart has already warned of potential price increases for consumers due to tariffs.

See also  Apple iPhone assembly in India won't cushion China tariffs: Moffett

Despite the cooling inflation reports, the Federal Reserve faces a communication challenge as it navigates the impact of tariffs on interest rates. With uncertainties surrounding the trade war, the Fed is cautious in its approach to monetary policy.

In addition to the PPI data, other economic indicators released in April include a 0.1% increase in retail sales and flat industrial production. These figures reflect the ongoing impact of tariffs on consumer behavior and industrial output.

Stay informed on the latest economic trends by signing up for the US inflation myFT Digest. Receive free updates on inflation, tariffs, and other key indicators shaping the US economy.

TAGGED:AprilmarginsPricesProducerprofitsqueezeTariffstumble
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