Retail sales edge higher; Walmart warns of price hikes; Producer costs decline

April’s U.S. retail sales edged up 0.1% from the prior month but increased 5.2% from a year earlier, as food services and motor vehicles posted some of the biggest gains in a climate of tariff-related uncertainty.

Commerce Department data released Thursday showed food and drinking places posted a 1.2% gain from March and rose 7.8% from April 2024. This occurred despite slowing sales facing numerous restaurant chains and franchisees during the past year, with several companies filing for bankruptcy or otherwise closing locations or cutting jobs. Possibly due to tariff concerns, most categories had flat to negative monthly growth.

“Consumers are still spending despite widespread pessimism fueled by rising tariffs,” Jack Kleinhenz, chief economist at the National Retail Federation, said in a Thursday statement on the latest sales numbers. “While tariffs may have weighed on spending decisions, growth is coming at a moderate pace and consumer spending remains steady, reflecting a resilient economy.”

Michael Pearce, deputy chief U.S. economist at forecasting firm Oxford Economics, said sales remain elevated in part by “frontloading” ahead of tariffs taking full effect, though there are signs of slowing. “Retail spending will weaken in the months ahead, first as a natural hangover from the frontloading, and then as a broader slowdown in response to tariff-fueled price increases,” Pearce said in a statement Thursday. 

Walmart is warning of price increases that could be seen on store shelves by the end of this month, as the world’s largest retailer joins other store chains struggling to absorb tariff-fueled cost increases for imported merchandise.

“It’s more than any supplier can absorb,” Walmart Chief Financial Officer John David Rainey told CNBC Thursday. “And so I’m concerned that the consumer is going to start seeing higher prices. You’ll begin to see that, likely towards the tail end of this month, and then certainly much more in June.”

Bentonville, Arkansas-based Walmart on Thursday reported a 2.5% annual gain in total revenue for its latest quarter as same-store U.S. sales rose 4.5% and net income increased 4.3%. But major retailers remain concerned about future effects of tariffs on supply chains and consumer spending.

The chief executives of Walmart, Target and Home Depot met last month with President Donald Trump to warn that price hikes and empty shelves could result from current and pending tariffs, especially those imposed on imports from China. The U.S. has since lowered planned tariffs on China as the two countries negotiate. 

U.S. producer prices, which often affect consumer prices, fell 0.5% in April from the prior month while increasing 2.4% from a year earlier, the Labor Department reported Thursday. Also known as wholesale prices, these include all costs that companies incur in providing goods and services, such as materials, labor and transportation expenses.

Matthew Martin, senior U.S. economist at Oxford Economics, said April’s monthly decline was the largest since the onset of the pandemic and was spurred largely by price drops for services rather than goods. Declines in costs to supply food and energy, including a “massive decline in egg prices,” were partly offset by rising expenses for categories like toys, furniture and electronic equipment, Martin said in a statement.

The Associated Builders and Contractors trade group noted that April’s construction input prices declined 0.1% from the previous month, though costs edged 0.1% higher than a year earlier. Builders were aided by sizeable year-over-year energy price drops, including 7.1% for natural gas and 4.9% for crude petroleum.

But trade tariffs brought year-over-year price increases for some key construction materials. “Steel mill product prices, for instance, rose 5.9%, while copper wire and cable prices increased 5%,” Associated Builders and Contractors Chief Economist Anirban Basu said in a statement.