US released its Import Price Index for May coming in at 2.3% which is higher the prior reading of 1.8% but lower than the projected reading of 2.5%. As for its annual Import Price Index, it came in at 17.8% which is now higher than both; the projected reading of 17.2% and the prior reading of 15.8%.

Increased prices of petroleum and natural gas were the main drivers to the gain in the prices of good imported. Imported petroleum rose by 7.8 percent in May while prices for imported natural gas inclined to 5.4 percent marking the eighth consecutive jump. If we exclude the fuels, import prices rose only 0.5 percent in May.

As for food prices which have been following the trend of energy prices, exports for food, beverages and feeds rose 14 percent in the year ending May being the largest yearly gain since March 1995! May alone was responsible for 1 percent of these 14.

Breaking imports down into regions, the Middle East comes on top as prices from that region were up by 5.6 percent in May. Japan prices remained flat but China showed a slight incline by 0.6 percent. The Euro Zone also gained 0.8 percent in May.

However, despite the dollar that was weak for quite some time, export prices from the US rose 0.3 percent which was the slowest gain since September 2007.

You'd think dear reader, that with prices inclining and inflation still on the rise, consumers would cut back on spending. But what was seen in May was the fastest increase in six months as retail sales unexpectedly rose 1 percent and thanks to what?! The STIMULUS PACKAGE that gave back nearly $50 billion in stimulus checks to households and businesses!

The Commerce Department released its Advanced Retail Sales for May coming in at 1.0% showing improvement as it's higher than both; the projected reading of 0.5% and the prior reading of -0.2%. As for its Retail Sales Less Autos, it came in at 1.2% which is once again an improvement as it's higher than the projected reading of 0.7% and the prior reading of 0.5%.

It's finally here and the results of the Term Security Lending Facility and stimulus package are starting to emerge in the economy as it finally obviously boosted spending in the economy giving the Feds the enough room they need to maneuver and hike rates as they wanted to battle inflation. Their statements were hawkish and the stance has once again become supported!

Again the major drivers to boost sales were higher gasoline and food prices but if they were to be stripped then sales would have gained 0.8 percent and still mark the biggest gain in a year. Gas station sales rose 2.6 percent while sales at food stores rose 0.4%.

Other contributors included sales at furniture stores which showed the biggest increase in 10 months as they rose 0.4 percent. Sales at building supply and garden stores were up 2.4 percent while sales at appliance stores rose 0.7 percent. Motor vehicle sales inclined 0.3 percent and sales at general merchandise stores inclined 1.2 percent as it was the largest incline at these stores in 14 months.

With this better than expected reading in retail sales, consumers showed that they are now spending freely and that the $600 checks reimbursed actually was used for purchases. And to the Congress, this is just what they hoped for when they first suggested and the $160 billion stimulus plan last February. The slowing wage increases and higher prices were taking a toll on spending behavior but as the IRS gave these checks back, consumers were relieved and it's safe to say that they spent them happily! All checks will be delivered by mid-July and hopefully more spending will be seen!

Meanwhile, concerning the Labor market, further signs of weakness were seen today when the Labor Department released their initial jobless claims for the week ending June 7 showing that the number of people reporting for first time aids leaped to 384,000 from a previous revised rise of 359,000; being the highest since March. Continuing claims rose 58,000 to 3.14 million in the week ending May 31 marking the highest level since February 2004.

But this wasn't the only number that was the highest since February 2004, the four week average of continuing claims rose to 3.09 million. As for the four week average of initial claims it was reported at 371,500, the highest level since May 17.

The ongoing weakness in the labor market is still expected to continue especially after the release of the Jobs report last week showing that the Non-farm had fallen more than the previous to -49K so this shouldn't have been much of a surprise to the markets.

Aside the weak labor data, the upbeat data from the sales and inflation helped support the dollar to instantly gain against majors before slightly reversing as it faced support levels on technical charts and provide Wall Street indices with momentum as the indices were all advancing.

Finally, the Commerce Department also released its business inventories for the month of April showing a rise to 0.5 percent from a previous revised reading to 0.2 percent from 0.1 percent and better than the expected reading of 0.3 percent.

Business sales inclined at the fastest pace in five months as it totaled 1.4 percent in April giving businesses the opportunity to carry on lean inventories of unsold goods. The inventory-sales ratio fell to 1.25 just above the record low of 1.24 in November. Stockpiles on hand are for 38 days of sales which is good at a time of weak demand. Now the good thing about lean inventories is that analysts see it a signal that the recession the US is currently in is mild

As I mentioned before dear reader, this is good news for the Feds because they can now hike rates as they hinted without having to worry that much. Yet we shouldn't ignore the data that will be released tomorrow concerning consumer prices which will also show a clearer trend for inflation. It seems like the view of the economy in the eyes of the Feds will not change and they hawkish stance they hold will remain as inflation is still the number one enemy to all policy makers in the world! So let's just wait and see whether prices in May have inched higher as expected giving the Feds more motive to hike rate or have surprisingly eased...