WASHINGTON (AP) – Wholesale prices in the US saw a decrease last month, providing further evidence that inflationary pressures are subsiding. However, President Donald Trump's Trade War clouds the economic outlook, alongside the new tariffs imposed by Beijing and Washington.
The producer price index, which measures inflation before it impacts consumers, reported a 0.4% decline, marking its first drop since October 2023, according to the Labor Department on Friday. Year-over-year, producer prices rose 2.7%, down from 3.2% in February, which was below the expected increase of 3.3%. Gasoline prices decreased by 11.1% since February, while egg prices have plummeted by 21.3% due to the avian flu outbreak.
When volatile food and energy prices are excluded, the core wholesale inflation rate experienced a 0.1% decrease from February, the first decline since July. Compared to the previous year, core producer prices grew by 3.3%, which was less than economists had anticipated.
The report follows a positive announcement from the Labor Bureau regarding inflation on a consumer level. The consumer price index has risen by just 2.4% since March 2024, representing the lowest year-over-year growth since September. Core consumer prices also recorded the slowest yearly increase in nearly four years.
The inflation outlook remains uncertain due to Trump's trade war. He has imposed a 145% tariff on Chinese imports, affecting a significant portion of imports from around the world with a 10% tariff that may increase in 90 days.
On Wednesday, China retaliated again, announcing an increase in tariffs on US goods from 84% to 125%. This escalation in the trade war between the two largest global economies has unsettled markets and raised concerns about a potential global slowdown.
Trade barriers are expected to elevate prices as importers attempt to pass on increased costs.
The inflation figures released this week surpassed economists’ forecasts, yet the retaliatory tariffs imposed by both the US and China are likely to temper this positive trend, according to Carl Weinberg, chief economist at High Frequency Economics.
“This good news may not last long,” Weinberg noted on Friday. “Tariffs will increase the cost of inputs for all imported producers, particularly in the April data set to be released on May 15th, we can expect to see the impact of these tariffs.”
Major US companies are already adjusting their strategies to mitigate potential damage. Walmart has reported challenges in its first quarter, while Delta has revised its financial projections for the year downward.
These companies announced adjustments this week, yet stocks of major retailers, such as Target and Macy’s, have plummeted sharply since the beginning of the year. Delta, the nation’s most profitable airline, experienced a 35% decline in 2025.
Weinberg stated that new inflation data will be available in mid-May, just after the US Federal Reserve convenes to discuss interest rates. The discussions have become even more complex due to the constraints of the global trading system.
The challenges faced by Chairman Jerome Powell and the Fed are highlighted in minutes released this week from the latest Fed meeting.
Minutes from February’s meeting suggest that the Fed could refrain from altering benchmark interest rates if inflation rates rise or if growth slows, coupled with an uptick in unemployment.
However, should both scenarios occur simultaneously, the Fed could “face difficult trade-offs,” as noted by officials on the central bank’s interest rate setting committee. Traditionally, if the Fed lowers interest rates to support and stimulate the economy through increased borrowing and spending, an increase in unemployment could result in a recession. Yet, Fed officials may be hesitant to make cuts if inflation surges, typically aiming to curb rising prices by adjusting the key rate, or potentially raising it if deemed necessary.
___
AP Economics Writer Christopher Al Gerber contributed to this report from Washington.
Source: apnews.com