INDICATOR: May Import and Export Prices

KEY DATA: Imports: -1.0 percent; Non-Fuel: -0.1 percent; Exports: -0.4 percent; Farm: +0.7 percent

IN A NUTSHELL: “Lower costs of imported goods are taking some of the stress out of shopping and that could give a boost to spending going forward.”

WHAT IT MEANS: For those of you worried about inflation, at least for now, chill. Europe is a mess, oil prices are down, further declines in gasoline prices are coming and the U.S. economy is not growing strongly enough for any firm to have much pricing power.

Import prices are falling as everyone around the world is trying to sell into the one market where there is some demand, the U.S. That means they are willing to take lower prices to sustain their sales.

A rising dollar is not hurting either. Indeed, the cost of imported goods of all types was flat to down in May.

In addition to fuel, food, consumer goods, industrial supplies excluding fuel and vehicles all posted modest declines. The prices of capital goods stayed put. There were some increases in paper products and building supplies, but that was just about it.

On the export side, the agricultural sector pushed through a good sized increase for the third consecutive month. There have been lots of ebbs and flows in the ability of food producers to raise prices and now increases are once again possible. There was also some pricing power in the big-ticket consumer product manufacturing area but that was limited.

MARKETS AND FED POLICY IMPLICATIONS: When you have a worldwide economic slowdown, the ability to raise prices tends to disappear and that has happened. That is good news for consumers especially since their incomes are not growing and as the Fed reported, their wealth is rapidly disappearing.

Business leaders may complain about uncertainty but when asked what would get them hiring again, the standard answer is simply more demand.

Well, you cannot get more demand unless consumers spend and they cannot spend if hiring is limited, wage gains are restrained and income growth in nonexistent.

That is the conundrum I have talked about for two years now and it looked like we were breaking out of it late last year. The recent job slowdown and wage declines don’t bode well for income and that is why so many economists are marking down their forecasts.

As for the markets, this report has to help, at least a little. But it still is so much about Europe and when hope rises, so do the markets.

When concerns deepen, the declines pile on. With Greek elections on Sunday, I suspect investors are too uncertain to take any stand with conviction.