As mid-year begins, high and rising food and energy prices are taking a toll across the globe. Domestically, there was good news in the rise in the ISM (purchasing managers) survey, the first in five months. But that was clearly tempered by a sixth straight monthly decline in employment.

With consumer expectations lower than they have ever been, continued bad news out of the labor market, gas and grocery prices still rising, and home prices still falling, consumer demand is likely to remain minimal. In fact, vehicle sales, which had been weak, dropped sharply in June, just as the price of a gallon of gas approached a national average of almost $4.

Despite a good ISM number, business investment isn’t likely to be much stronger. With consumption and investment weak heading into the second half of the year, there is no mystery as to why the stock market has given up all the gains of the past few months.

The Leading Economic Indicators reflect weakness across the globe — continued weakness in North America and new softening in Europe and East Asia. The weak Tankan survey in Japan shows that businesses both big and small are feeling the impact of rising raw material prices not being matched by retail price hikes. Keep in mind that profit growth in 2007 was lower than in the previous half decade and now rising costs are likely trimming growth prospects, the big factor behind the weak Tankan report.

The German IFO survey reflects concerns about slowing industrial output and potentially rising unemployment. Elsewhere in Europe, Denmark's economy is said to be close to contracting. Many in the U.K. expect they are next (consumer confidence there is dropping), with perhaps Spain (falling retail sales and rising unemployment) and Italy not far behind. In Asia, India, hard hit by inflation (over 11 percent), has seen its economic growth rate slip from 9 percent to about 7 percent. And stock markets around the globe have sold off. The BBC Global 30 stock index was off by almost 9 percent in June. The big question is will these conditions continue far into the second half of the year. By some measures, inflation neared 4 percent in June in the euro area. That kind of number explains why the ECB hiked rates.

And with European interest rates rising, and the dollar being as persistently weak as it has been, and with broad financial market expectations that the Federal Reserve may hike rates, the Fed could well vote for a hike at its early August meeting. Given the economic climate, rising rates would put a second half recovery out of reach. The news may not get worse, but good news may have to wait for a new year.