Prices paid to U.S. producers of goods and services unexpectedly declined in April, defying predictions that tariffs would reignite inflation.
The producer price index for final demand fell 0.5 percent last month, the Labor Department said on Thursday, the largest decline since April of 2020.
Economists had forecast a 0.2 percent increase for the month. The prior month’s reading was revised up from a decline of 0.4 percent to flat.
Compared with a year ago, the producer price index (PPI) is up 2.4 percent, in line with expectations. In March, the index was up 2.7 percent.
The producer price index is often mistakenly called a measure of wholesale prices, a confusion that goes back to its original name as the wholesale price index. In fact, the index has never been a measure of wholesale prices and the name was changed in 1978.
The PPI for final demand measures the prices that businesses in the U.S. receive for goods, services, and construction sold for personal consumption, capital investment, government purchases, and exports. It excludes import prices, since those are paid to foreign producers, and sales taxes, which are paid to the government.
Although the PPI excludes imports, many economists expected tariffs would indirectly create inflationary pressures that would raise prices. The April report suggests this has not happened.
The better-known consumer price index (CPI) tracks the prices U.S. consumers pay, which means it excludes export prices but includes sales taxes. The CPI also excludes prices paid by businesses, nonprofits, and governments. It declined 0.1 percent in March and rose by a lower-than-expected 0.2 percent in April.
Although the two measures can differ from each other in any particular month, they typically track each other over time. Historically, neither is a leading indicator of the other.
Excluding food and energy, prices fell 0.4 percent in April and are up 3.1 percent from a year ago.
A measure of retail and wholesale profit margins called trade services fell by a steep 1.6 percent. Excluding food, energy, and trade services, producer prices fell 0.1 percent.
Prices of goods for final demand were flat for the month following a 0.9 percent decline in March. Compared with a year ago, producer prices are up by 0.5 percent.
Services prices declined 0.7 percent. Two-thirds of the decline was caused by the drop in wholesale and retail margins. Excluding trade services, transportation, and warehousing, prices in the services sector fell 0.3 percent. Transportation and warehousing prices fell 0.4 percent.
Egg prices, which have been a focus of attention since last year’s presidential campaign, crashed by 39.4 percent.
