As expected, the CPI release on Thursday showed a decline in the CPI for May by 0.3 %.  Much of this was driven by a decline in energy prices, specifically gasoline that was down 6.8%. No surprise there, we’ve been writing about that for the last few weeks.  There was also a notable decline in Utility Gas (Natural Gas) of 4.1%.

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However, the effects of these energy commodities have yet to be fully realized. Actually, any commodity based item should start to feel pressure due to the strengthening of the dollar. In other words, this probably isnt the first month we'll see a decline.

Food, for example, has a significant portion of its costs rolled up in transportation costs, yet it was flat month-to-month. Even more of an opportunity exists in the costs of apparel and medical commodities. These all need materials that, on a relative basis, should be dropping due to the weakness in commodity prices. One could say this is a benefit of the European crisis that Americans can hopefully bank on.