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Friday, May 6, 2011

A temporary reprieve from inflation?

A huge drop in commodity prices—including silver and oil—received wide coverage in at the market close last night.   Here’s one story from USA Today (click to link), and here’s more coverage from this morning’s New York Times (click to link).

Implications:   Here’s the good news.  Speculators are now suggesting that the price of gas could drop over the next week to ten days (just in time for Memorial Weekend travel). 

Here’s the catch: While many analysts are looking at the run-up on silver as another “bubble,” the fundamentals that were driving price increases for other commodities are still in play.  Those items are greater demand from growing economies in China, India and elsewhere… and an improving economy in the U.S.  (Two reasons for yesterday’s drop in commodity prices was the jump in new unemployment benefit claims and the slowing growth of the economy.)

Yesterday’s drop in oil and other commodity prices is a welcome thing at the consumer level.  But stand by…

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

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