Wall Street is giddy this morning over the Commerce Department's retail sales report, which showed a 1 percent jump in May. The story is that consumers are freely spending their tax rebates and that the economy isn't so bad off after all. But the report is unadjusted for inflation. It's in nominal dollars. In case you hadn't noticed, inflation is in the house.

The AP story makes much of the fact that, even if you strip out gasoline sales, retail sales rose 0.8 percent in May. But gas isn't the only thing inflating. Inflation across the board makes last month's result look much more impressive than it really is. Don't tell me that inflation is only 0.2 percent a month. That was April's number. And, as measured by the Labor Department, it's badly flawed. Of course there probably was a tax-rebate effect in May, but guess what? The rebate is a one-time deal.