US Producer Prices Fall Unexpectedly as Margins Decline
Prices paid to US producers unexpectedly declined in April by the most in five years, largely reflecting a slump in margins, suggesting companies are absorbing some of the hit from higher tariffs.
The 0.5% decrease in the producer price index followed no change in March, Bureau of Labor Statistics data showed Thursday. The median forecast in a Bloomberg survey of economists called for a 0.2% gain. Excluding food and energy, the PPI declined 0.4% — the most since 2015.
Stripping out food, energy and trade, a less-volatile measure favored by many economists, prices fell 0.1%, the first decline in five years. Compared with a year ago, the gauge rose 2.9%.
The figures suggest American manufacturers and service providers are so far refraining from passing along higher US duties on imports. The impact on consumers has also been modest even as producers are feeling the pinch from aggressive levies on imported materials and other inputs.
Business leaders are wrestling with how best to mitigate the impact of higher tariffs in a frequently changing policy environment. The latest Federal Reserve Bank of Atlanta business inflation expectations survey showed fewer than one in five firms said they would be able to fully pass on a 10% increase in costs.
Some businesses have been absorbing some of the extra costs in an effort to avoid a pullback in demand at a time when consumers are already feeling jittery about the economy. Consumer sentiment has slumped, and a separate report out Thursday showed retail sales barely rose.
After a slew of economic reports, Treasuries extended the rally as traders boosted their expectations of Fed rate cuts. The dollar remained lower, while the S&P futures pared some earlier losses.
Automaker Stellantis NV is offering discounts on its vehicles, while Hyundai Motor Co. is holding prices steady until June. The pricing actions show how some of the largest carmakers are trying to calm worries that tariffs on imported cars will drive up prices by thousands of dollars.
Source: Bloomberg
