Retail Sales Stall as PPI and Fed Surveys Signal Uneven Consumer Demand

Is Consumer Strength Slipping? Retail Sales Growth Hits the Brakes

U.S. retail sales rose just 0.1% in April, sharply down from March’s revised 1.7% surge, according to Commerce Department data released Thursday. Economists had anticipated flat sales, and the weak print underscores consumer fatigue as tariff-induced buying fades. Households, previously front-loading vehicle purchases ahead of a 25% global car tariff, appear to be retreating, particularly on discretionary spending.

Stripping out autos, gasoline, building materials, and food services, core retail sales fell 0.2%—a disappointment versus the 0.3% gain forecast. This core measure, key to GDP calculations, suggests consumer momentum may be stalling as broader economic uncertainty weighs on sentiment.

Producer Price Index Slides: Does Soft Wholesale Pricing Confirm Demand Weakness?

The Producer Price Index (PPI) for final demand fell 0.5% in April, its largest drop in over a year. Final demand services drove the decline, down 0.7%, led by steep margin compression in trade services—especially machinery and vehicle wholesaling, which sank 6.1%. Goods prices were flat, despite notable declines in energy (-0.4%) and food (-1.0%).

Core PPI, which excludes volatile food, energy, and trade services, edged down 0.1%—its first decline since April 2020. Year-over-year, the index rose 2.4%, suggesting producer inflation remains moderate. For traders, the combination of weakening services pricing and soft core readings raises red flags for corporate margins, especially in the retail and transportation sectors.

Federal Reserve District Surveys Paint Mixed Regional Outlook

The Philadelphia Fed’s May Manufacturing Business Outlook Survey signaled ongoing weakness, with the current activity index at -4.0—up from -26.4 in April, yet still in contraction. New orders rebounded into positive territory, but shipments declined again, and elevated input costs remain a concern. Still, expectations for future growth rose sharply, with the six-month outlook index climbing to 47.2.

In contrast, the NY Fed’s Empire State index dropped to -9.2 from -8.1, marking a third consecutive monthly decline. While new orders improved, hiring and confidence lagged. Prices paid surged to 59.0, the highest in over two years, complicating any dovish outlook from the Federal Reserve.

Labor Market Steady but Not Strengthening

Initial jobless claims held steady at 229,000 for the week ending May 10, while the four-week average edged up to 230,500. Continued claims also rose marginally, suggesting the labor market remains stable but is not tightening further—a critical input for Fed policy expectations.

Outlook: Cautiously Bearish on Consumer and Retail-Driven Equities

The combination of soft retail sales, a declining PPI, and weak regional manufacturing data suggests headwinds for consumer demand and corporate revenue growth. Despite isolated signs of resilience, such as steady employment and future business optimism in Philadelphia, the broader signal leans bearish in the short term for consumer discretionary and retail sectors. Traders should monitor further consumer data and Fed commentary closely, especially with inflation pressures diverging between goods and services.