Tariffs Slow Retail Spending As Producer Prices Post Sharpest Drop Since 2020

Zinger Key Points

• April retail sales rose 0.1%, slowing sharply from March’s 1.7% gain.
• Producer Price Index dropped 0.5%, the largest monthly fall since 2020.

April retail sales data showed that the round of tariffs announced by President Donald Trump on “Liberation Day” started to produce their effects by reducing household consumption.

However, while households reined in spending, inflationary pressures at the producer level unexpectedly contracted in April, notching the biggest decline since April 2020 and highlighting the disinflationary impact of tariffs on input costs across industries.

U.S. retail sales grew only by 0.1% in April from the previous month, a report from the Census Bureau showed Thursday. The outcome marks a sharp reversal from March’s upwardly revised 1.7% gain, yet slightly topped economist expectations of no change.

A relevant drag came from motor vehicles and parts which contracted by 0.1%. In March, auto-related sales jumped 5.5% as consumers rushed to buy before tariffs took effect.

Stripping out autos, retail sales also rose 0.1%, a slowdown from March’s 0.8% increase and below the 0.3% consensus.

When excluding both gasoline and autos, the figure improves slightly to a 0.2% rise, though it still marks a deceleration from March’s 1.1% growth.

On an annual basis, April retail sales were up 5.2% from a year earlier, unchanged from March.

Tariffs Slash Producer Prices

The Producer Price Index fell 0.5% month over month, marking the sharpest decline since April 2020. This was a steep reversal from March’s flat reading and missed economists’ expectations for a 0.2% increase.

On a year-over-year basis, producer inflation cooled to 2.4%, down from 3.1% in March and undercutting forecasts of 2.5%.

“The April decline in the index for final demand is attributable to prices for final demand services, which decreased 0.7%,” the Bureau of Labor Statistics said.

More than 40% of April’s drop in the final demand services index stemmed from a 6.1% decline in margins for machinery and vehicle wholesaling. Additional declines were recorded in portfolio management, food and alcohol wholesaling, system software publishing, traveler accommodations, and airline passenger services.

Core producer prices, which exclude food and energy, dropped 0.4% on the month, wiping out the previous month’s 0.4% gain and coming in well below the 0.3% estimate.

On an annual basis, core PPI rose 3.1%, easing from 4% in March but in line with consensus.

Market Reaction: Yields Rise, Stocks Slip

U.S. stock futures pulled back after a three-day rally. By 8:40 a.m. ET, futures on the S&P 500 were down 0.3%, while Nasdaq 100 futures fell 0.4%.

Meanwhile, the U.S. Dollar Index (DXY) fell to 100.7 levels.

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Originally Posted on May 15, 2025 – Tariffs Slow Retail Spending As Producer Prices Post Sharpest Drop Since 2020