The costlier food and energy prices are making it hard for consumers to buy anything even as daily necessities rise. Spending has fallen, wages dropped and confidence sunk substantially as many still predict that the second quarter of the year will still be weak for the US even with the stimulus package and tax rebate checks in affect.

Wages and salaries fell 0.2 percent as bonus season has come to an end while employee compensation also fell 0.1 percent marking the first decline in a year. For a second consecutive month after-tax incomes adjusted for inflation were steady.

The report released by the Commerce department showed that consumer spending increased mildly in April reporting a 0.2 percent gain compared to the 0.4 percent rise in the previous rise yet it was flat after adjusting for inflation. Personal savings were unchanged at 0.7 percent as real consumer spending was flat since January. Consumer spending represents about 70 percent of the US GDP and with that slowing down then its only logical to see growth slowing as well which is why economists and analysts still believe that this is really what will be seen soon.

Core consumer prices, which exclude energy and food prices were stable at 2.1 percent on the yearly basis yet slightly dropped in April to 0.1 percent from March's 0.2 percent reading showing mild moderation. The Feds watch the Core PCE reading as a measure of problematic inflation if it is above the target range between 1.5% and 2.0%.

In a different report, the Chicago PMI for the month of May showed that the business activity in the Chicago region remains in contraction for the fourth straight month yet it has picked up from the month before as it came in at 49.1 being the highest since January where April's reading was 48.3. As long as the reading is below 50, this shows contraction in the overall business sector.

Finally, confidence is still on the low as Michigan released its consumer sentiment final reading for the month of May showing an upside revision to 59.8 from the preliminary reading of 59.5 yet this is worse than April's confidence reading of 62.6. May's reading is the lowest level in 28 years since June 1980 as consumers are still thinking about the aftermath of inflation. Inflation expectations is at a 20+ year high while the consumer expectation index fell to 51.1 from 53.3 in April marking the lowest since October 1990.

The common things in the markets now are the sinking confidence and the rising inflation. As we see expectations for prices to continue to rise is still valid and it could be true that what Dallas Fed President Mr. Fisher might be seen as the Feds could potentially have to hike rates to battle inflation if they're satisfied with the current growth rates.

The dollar is weak once again and markets are mixed with no specific trend set for the dollar. Thank god it