US producer prices unexpectedly dropped in April, led by the steepest decline in service costs since 2009, according to the Labor Department. The Producer Price Index (PPI) for final demand fell by 0.5%, following a revised flat reading in March. Economists had predicted a 0.2% increase.

Driving the decline was a 0.7% drop in wholesale service prices, with trade services falling 1.6%. Hotel room rates sank 3.1%, airline fares dropped 1.5%, and portfolio management fees plunged 6.9%.

Over the past 12 months, the PPI rose 2.4%, down from 3.4% in March. The tame April reading may lead economists to lower estimates for core PCE inflation, a key measure tracked by the Federal Reserve. Despite easing trade tensions with China, tariffs remain elevated. Economists now expect core inflation to peak around 3.6% this year, lower than previous forecasts.