US producer price index unexpectedly declined in April amid rising business costs

In April, the US Producer Price Index (PPI) fell at its fastest rate in five years. According to Bloomberg, this suggests that businesses are absorbing some of the hit from tariff hikes by cutting into their own profits.

Bureau of Labor Statistics data showed the PPI fell 0.5% in April, following a flat reading in March. Economists surveyed by Bloomberg had expected a 0.2% increase. The core index dropped 0.4%, marking its sharpest monthly decline since 2015.

Excluding food, energy, and trade, US producer prices fell 0.1%, posting their first monthly decrease in five years. Compared with a year ago, the gauge jumped 2.9%.

Samuel Tombs of Pantheon Macroeconomics notes that US manufacturers and service providers have so far been reluctant to pass their rising costs on to consumers, despite tariff pressures. However, the latest Atlanta Fed survey suggests fewer than 20% of businesses could fully absorb a 10% cost hike.