Fresh economic data from April, a month marked by heightened uncertainty over trade tariffs and their potential tariff impact on inflation, has cast doubt on earlier warnings of recession and surging inflation. Contrary to pessimistic business and consumer sentiment surveys, hard data suggests the U.S. economy is holding steady. Retail sales remained stable, and wholesale prices dropped unexpectedly — both signs that inflationary or recessionary pressures may not be as imminent as feared.
These findings are especially significant in light of the tariff anxiety that dominated much of April. While anecdotal warnings about rising costs and business stress have grown louder, the actual data indicates that the economy, for now, continues to weather the storm. Retail sales ticked up by 0.1% last month following a strong 1.7% gain in March, which was revised upward and marked the highest increase in two years. The surge in March was attributed to consumers rushing to buy before expected price hikes due to tariffs.
Walmart Sounds the Alarm on Tariff-Driven Price Increases
Despite the broader data suggesting minimal inflation impact so far, major retailers are beginning to express concern. Walmart, the largest retailer in the U.S., has warned it cannot fully absorb rising costs caused by tariffs and will begin passing those expenses onto consumers.
John David Rainey, Walmart’s Chief Financial Officer, stated on Thursday, “We’re wired for everyday low prices, but the magnitude of these increases is more than any retailer can absorb. It’s more than any supplier can absorb.” He warned that consumers may begin seeing higher prices as early as the end of May, with more significant increases expected by June.
Walmart’s comments are particularly alarming given its role in setting price standards across the retail sector. If a company of its scale cannot avoid price hikes, smaller retailers are even less likely to absorb those additional costs. This raises concerns that the steady consumer price trends could be disrupted in the coming months, even if they haven’t been yet.
Tariff impact on inflation Still Under Control, But Risks Remain
April’s Producer Price Index (PPI), a key measure of wholesale inflation, provided more reassuring news. PPI fell by 0.5% last month following a flat reading in March. Prices for goods held steady, while service prices dropped by 0.7% — the largest decline since the index’s creation in 2009. This indicates that many businesses are absorbing higher costs, leading to squeezed profit margins rather than immediate price hikes for consumers.
Restaurant and bar sales — often used as a proxy for service-sector activity — increased by 1.2%, suggesting service spending remains strong even as goods consumption dipped slightly. ING Chief International Economist James Knightley noted, “There is little evidence, so far, that tariffs are inflationary… but as Walmart suggested Thursday morning, that is a situation that may not last long.”
In summary, while the April data offers a breather from fears of a tariff impact on inflation leading to an economic downturn, the warnings from major retailers like Walmart suggest that inflationary pressure could still emerge in the months ahead.
