US wholesale trade sales increased 2.0% month-on-month in April, a deceleration from the prior month's pace, according to the latest economic data. The figure represents a slowdown compared to the revised March reading of 3.0%, which was adjusted upwards from the previously reported 2.8%. This moderation in sales growth suggests a cooling in demand at the wholesale level following a strong start to the quarter.

The April print highlights a shift in momentum for the wholesale sector, which had seen robust activity in the preceding period. The downward revision of the prior month's data from 2.8% to 3.0% underscores the volatility in recent trade figures. Economists had been monitoring these metrics closely for signs of sustained inventory accumulation or consumer demand softening.

The data provides insight into the broader economic trajectory, as wholesale sales often serve as a leading indicator for retail spending and overall economic health. While the positive growth indicates continued activity, the slowing rate may prompt businesses to adjust their inventory management strategies in the coming months.

Goldman Sachs economists found that companies have increased price markups as consumer price sensitivity declined, driving profit margins higher. After-tax corporate profits as a share of value added doubled from about 5% in the late 1980s to over 10% recently. Over the same period, U.S. firms substantially raised markups, which is the amount by which prices exceed the marginal cost of producing goods and services.

The trend toward rising markups is partly explained by falling costs, but data shows customers are increasingly paying amounts that cover much more than production costs. This occurs despite sentiment surveys confirming consumers are aware of and complaining about rising prices.

Declining Price Sensitivity

Studies cited by Goldman economists show consumers' sensitivity to price has been on the decline. This trend is explained by rising incomes. Higher income raises the opportunity cost of time, leading consumers to search less for lower prices.

Economist Kunal Sangani estimates that increases in average income and income inequality can account for a roughly 8pp rise in the aggregate retail markup from 1980 to 2018. This means less price-sensitive households account for a larger share of total consumption.

Corporate Earnings Impact

The dynamic supports the K-shaped economic narrative, where higher-income cohorts drive spending while lower-income groups retrench. For investors, this environment supports sustainable earnings growth, which is bullish for stocks. Publicly traded companies remain effective at maneuvering in ways that grow earnings and improve shareholder value.