Retail sales gained a seasonally-adjusted 2.7% in August, according to the U.S. Department of Commerce. This follows a 0.2% decline in July. The August results beat analyst expectations soundly, lending support to talk of a recovery. The Cash for Clunkers program is cited as contributing to August sales.

Without autos, sales increased 1.1%, still ahead of the anticipated 0.4% gain. Take gas out of the measure, as well, and retail sales grew 0.6%.

Inventories fell in July, for the twelfth month in a row, with the 1% decline a tad higher than the 0.9% anticipated by many economists.

Markets throughout the world have been rallying on the expectation that the world recession is ending. Lurking underneath the surface are some disturbing events.

Japan is in a sharp deflationary spiral. The Corporate Goods Index, which measures wholesale prices, plunged 8.5%, this after a 6.7% drop in June. This is the fastest drop on record.

Let's look at other deflationary numbers. Import prices fell 33.3% in yen terms and 26.5% on a contract-currency basis. Export prices fell 15.3% in yen terms and 6.5% in contract currencies.

New jobless claims jumped unexpectedly last week by 32,000 to 637,000, much worse than economists predicted. And we have another disappointing number: Continuing claims for unemployment rose to a record high of 6.56 million, up from 6.34 million the previous week. The insured unemployment rate rose by .1% to 4.9%.

Obviously, these numbers are throwing cold water on any claims of reaching bottom. Last week, the Labor Department reported that unemployment rose to 8.9%, the highest level in 25 years.

U.S. wholesale prices also rose in April, led by rising food costs. This is a weird fact because it indicates that we are not spiraling into deflation, but it doesn't help the average person. The increase was led by the price of eggs, beef and milk. The price of gas rose by 2.6% but residential fuel costs eased.

U.S. investors and consumers haven't received much good news lately, which is why Friday's producer price index report was a welcome sight.

U.S. producer prices fell a seasonally-adjusted 0.9% in August, the U.S Labor Department announced Friday, as lower energy prices provided some hope that inflation at the wholesale level will moderate in the months ahead.

Economists surveyed by Bloomberg News had expected the August PPI index to fall 0.5%. Producer prices increased 1.2% in July, 1.8% in June, 1.4% in May, and 0.3% in April.

Meanwhile, the core rate, which excludes food and energy costs, increased 0.2%, the Labor Department said, in-line with the Bloomberg News 0.2% consensus estimate.

Economist Peter Dawson told BloggingStocks Friday the August PPI is a pleasant sight for a U.S. market and an economy that's grappling with a series of financial and economic hurdles.

"The report shows a pull-back in energy prices, which is welcome, as it's been the primary culprit in both wholesale and retail inflation," Dawson said. "If wholesale prices continue to trend lower, that will ease pressure businesses face to raise prices to keep pace with costs. Lower oil and gasoline prices will also provide a modest amount of stimulus to the U.S. economy, as it will increase consumer disposable income."

The Wall Street Journal (subscription required) reports that producer prices launched upward at a 1.2% monthly rate in July. The rise in the PPI -- which was 0.7 percentage points faster than the 0.5% rate economists expected -- was the result of rising wholesale prices for energy spreading to "automobiles, prescription drugs and capital equipment."

Since the price of oil has dropped 24% from $147 to $112, should we all be relieved that July's number is a temporary blip? Let's hope so, because if not, rising wholesale prices make it even harder for businesses to make a profit when consumer demand is weak.

These higher wholesale prices mean that businesses have two options to maintain profits: keep prices the same but cut costs in other areas by finding productivity improvements, cutting back on payrolls and salaries and the likes, or raise prices to offset those rising costs.