The recent pullback in oil prices may distort inflation for the next few months, but the underlying inflation in other goods will still be haunting us. Much of the retreat in oil prices was exchange rate related when the dollar had a temporary rise. Remember, around the world, inflation has been picking up as a result of loose monetary policy worldwide, except for Europe. The ECB rightly raised rates recently, even as their economies have slowed somewhat.

One of the reasons for the slight rise in the dollar is that banks have become more careful about their lending policies. If they had been more careful to start with... well, that's money under the bridge. Reports of those tighter policies and the assertion that the Federal government would not let Freddie Mac and Fannie Mae fail, gave some support to the dollar. That support won't last because the M2 money supply is still growing at a +6% rate, three times faster than the economy. It is likely that any dollar moves will be short-lived. If the Fed raises rates, that would be one of the best things that could happen to the dollar.

Retail sales data were released, and I always make sure to look at e-commerce growth as a part of my analysis. While GDP grew at +1.9% for the second quarter (likely to be substantially revised this week), e-commerce retail, adjusted for inflation, grew at +8%. Among the reasons is that consumers were looking to save on gas: rather than drive, they used their keyboards. In the last five years, e-commerce is up more than +43%, while the economy is up just +14.6%.