THE NEWS

Following the cooler than expected CPI, US Producer Prices plunged in April, down 0.5% MoM (vs +0.2% MoM exp) – the biggest drop since April 2020 (but we note that last month’s 0.4% MoM decline was revised up to unchanged). The headline print was dragged down to +2.4% YoY (the lowest since Sept 2024)…

Source: Bloomberg

Under the hood, Prices for final demand services moved down 0.7 percent in April, the largest decline since the index began in December 2009.

Source: Bloomberg

Core Producer Prices plunged by the most on record (back to 2010)…

Source: Bloomberg

PPI Final Demand Services

Prices for final demand services moved down 0.7 percent in April, the largest decline since the index began in December 2009. Over two-thirds of the broad-based decrease can be traced to margins for final demand trade services, which dropped 1.6 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services fell 0.3 percent and 0.4 percent, respectively.

• Product detail: Over 40 percent of the April decline in the index for final demand services is attributable to margins for machinery and vehicle wholesaling, which dropped 6.1 percent. The indexes for portfolio management, food and alcohol wholesaling, system software publishing, traveler accommodation services, and airline passenger services also fell. Conversely, prices for outpatient care (partial) advanced 0.3 percent. The indexes for furniture retailing and for inpatient care also moved up. (See table 2.)

PPI Final demand goods

Prices for final demand goods were unchanged in April following a 0.9-percent decrease in March. In April, the index for final demand goods less foods and energy increased 0.4 percent. In contrast, prices for final demand foods and for final demand energy declined 1.0 percent and 0.4 percent, respectively.

• Product detail: Among final demand goods in April, the index for general purpose machinery and equipment advanced 1.1 percent. Prices for residential electric power, fresh and dry vegetables, non-electronic cigarettes, and utility natural gas also moved up. Conversely, the index for chicken eggs dropped 39.4 percent. Prices for gasoline, gas fuels, diesel fuel, and primary basic organic chemicals also fell.

Margin pressure remains on American corporations…

Source: Bloomberg

It would appear that despite all the FUD, companies are soaking up any tariff price increases and NOT passing them on to customers.

Finally, energy prices are set to drag CPI and PPI even lower in the next month or so…

Source: Bloomberg

But, but, but… the PhDs said tariffs were inflationary!!

If BofA’s omniscient analysts are right (and they have been serially on the correct side of this data series relative to consensus for months), then traders should brace for disappointment this morning for the retail sales data.

But…

For once, the BofA analysts were incorrect as headline retail sales rose 0.1% MoM (better than the 0.0% MoM exp, but this follows a sizable upward revision in March to +1.7% MoM (from +1.4%). With the revision that left retail sales up 5.2% YoY – near its highest since Dec 2023

Source: Bloomberg

Under the hood, Sporting Goods sales declined the most while Building Materials rose the most…

 

As a reminder, this data is nominal, so adjusting ()very roughly) for inflation, retail sales rose 2.8% YoY, equalling its highest since Feb 2022…

Source: Bloomberg

More problematically, the Control Group – which feeds directly into GDP – was a big miss, dropping 0.2% MoM (vs expectations of a 0.3% MoM rise)…

Source: Bloomberg

So, the good news is bottom-up Americans are spending… but top-down GDP may be negatively affected.