DE: CPI


Wed Apr 15 01:00:00 CDT 2015

Consensus Actual Previous
Month over Month 0.5% 0.5% 0.5%
Year over Year 0.3% 0.3% 0.3%

Highlights
The final CPI data for March confirmed the flash figures and so left intact a 0.5 percent monthly rise and a 0.3 percent annual rate, up from February's 0.1 percent.

The HICP was also unrevised and so also still shows a 0.5 percent gain versus January and a 0.1 percent increase from a year ago, a couple of ticks higher than last time.

The monthly advance in prices was mainly attributable to a largely seasonal 6.3 percent jump in the cost of clothing and footwear and a 1.9 percent bounce in heating oil charges. Motor fuel was also up a sizeable 4.2 percent. The main areas of weakness were holidays (minus 3.0 percent) and vegetables (minus 1.8 percent). Excluding energy, prices increased 0.4 percent versus mid-quarter and, at 1.0 percent, their yearly rate was unchanged from February.

Back-to-back increases in headline inflation and a recent gentle rise in the underlying rate hold out hope that deflation pressures may be starting to ease in the German economy. However, there is a long way to go before price rises are even close to where the ECB would like to see them.

Definition
The consumer price index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly and annual changes in the CPI provide widely used measures of inflation.

Description
The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries such as Germany where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer. As a member of the European Monetary Union, Germany's interest rates are set by the European Central Bank.

Germany like other EMU countries has both a national CPI and a harmonized index of consumer prices (HICP). The HICP is calculated to give a comparable inflation measure for the EMU. Components and weights within the national CPI vary from other countries, reflecting national idiosyncrasies. The preliminary release is based on key state numbers which are released prior to the national estimate. The states include North Rhine-Westphalia, Baden-Württemberg, Saxony, Hesse, Bavaria and Brandenburg. The release date is not announced in advance but the preliminary estimate of the CPI follows in the same day after the last of state releases. The data are revised about two weeks after preliminary release.

Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.

By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.