The Producer Price Index (PPI), which tracks the average change over time in the selling prices received by domestic producers, fell by 0.5% in April, marking its largest drop in five years, according to the U.S. Bureau of Labor Statistics on Thursday.
This decline represents the first time the PPI has dropped since October 2023. Year-over-year, producer prices rose by 2.4% from last April, though this is a significant slowdown from the 3.4% year-over-year increase recorded in March, as reported by the Associated Press. The drop in producer prices contradicted economists’ predictions, who had anticipated an increase last month.
Services prices, reflecting what domestic producers charge for the services they provide, fell by 0.7% in April, marking the largest drop since the index began in December 2009, according to the Bureau of Labor Statistics. Wholesale food prices also declined by 1% last month, with egg prices dropping by 39%.
The report adds to the positive economic news celebrated by the Trump administration this week, following a Tuesday announcement from the Labor Department that inflation had reached its lowest level in four years. The consumer price index increased just 2.3% from April 2024, the smallest year-over-year rise since February 2021.
POLITICO reported on Wednesday that the inflation report has surprised economists as “there was broad anticipation that Trump’s levies on Chinese imports, steel and aluminum and certain Canadian and Mexican products had caused prices for apparel, electronics and other consumer goods to spike.” The outlet noted that “the opposite has occurred” as the cost of clothing and new cars, which were supposed to take the brunt of Trump’s tariffs, both dropped.
Economists continue to predict that President Donald Trump’s tariffs will lead to price increases, with American consumers likely feeling the impact over the summer. However, as Trump continues negotiating trade deals, these forecasts could change. Some businesses still expect consumers to face the burden of Trump’s tariffs in the near future. Walmart, for example, has indicated it may raise prices as early as this month due to the tariffs, according to CNN.
