United States retail sales rose marginally in April, signalling a slowdown in consumer spending as the initial boost from early motor vehicle purchases ahead of tariff hikes faded.
The Commerce Department’s Census Bureau reported on Thursday that retail sales edged up 0.1% last month, following a revised 1.7% surge in March. This was slightly better than expectations for flat growth, but highlighted the growing drag of trade tensions.
On a year-over-year basis, retail sales rose 5.2%.
Sales at motor vehicle dealerships, which had surged 5.5% in March, slipped by 0.1% in April.
Sporting goods, hobby, and music stores saw a 2.5% drop, while miscellaneous store retailers reported a 2.1% decline.
Online retail showed modest growth, rising 0.2%, and food services and drinking places posted a 1.2% increase after a 3.0% rebound in March.
The data adds evidence that President Trump's tariff policies, even with the temporary 90-day truce with China reached last weekend, are beginning to curb consumer spending.
A separate report from the Labor Department painted a similar picture of cooling demand. The producer price index (PPI) for final demand fell 0.5% in April, well ahead of an expected 0.2% growth.
On a year-over-year basis, the producer price index rose 2.4%.
The decline was driven primarily by a sharp drop in service costs, particularly in sectors like air travel and hotel accommodation.
Prices for wholesale services fell 0.7%, the biggest drop since records began in December 2009, with more than 40% of April's drop in final demand for services due to a 6.1% fall in machinery and vehicle wholesaling margins.
Core goods prices rose 0.4%, suggesting that goods producers are starting to pass on tariff costs to consumers.
Food prices fell 1.0% and energy prices dropped 0.4% for final demand. The price index for chicken eggs also dropped 39.4%.
Meanwhile, Federal Reserve Chair Jerome Powell warned on Thursday of a potentially more volatile economic environment. “We may be entering a period of more frequent, and potentially more persistent, supply shocks - a difficult challenge for the economy and for central banks,” he said.
The CME FedWatch Tool now indicates that the Federal Reserve will begin cutting interest rates later in the year, with expectations of a 25 basis point cut in July falling to just 35.9%, down from 50% in the previous session.
