FR: CPI


Wed Apr 15 01:45:00 CDT 2015

Consensus Actual Previous
Month over Month 0.7% 0.7% 0.7%
Year over Year 0.0% -0.1% -0.3%

Highlights
Consumer prices performed much as expected in March. A seasonally large rebound in charges in manufacturing was primarily responsible for a 0.7 percent monthly bounce in the headline CPI that nudged up the annual inflation rate a couple of ticks to minus 0.1 percent.

Within manufacturing the monthly increase in prices was especially sharp (2.0 percent) and reflected a normalisation in levels following an extra week of sales in February. This was particularly true of clothing and footwear (12.6 percent versus 10.2 percent in March 2014). However, there was significant upside pressure too from oil products (2.9 percent) and fresh food (2.3 percent). Even so, prices still fell in some areas, notably health products (0.7 percent) and transport and communication (0.5 percent).

As a result the seasonally adjusted core CPI was just 0.1 percent firmer on the month and, at 0.2 percent, the annual underlying inflation rate was similarly only a tick higher than in mid-quarter.

There are no major surprises in today's data which in large part simply unwind the distortions seen in February. The French economy showed some belated signs of life last quarter but for now domestic demand remains too sluggish to put any real upside pressure on CPI inflation.

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 represent the main rates of inflation. The national CPI is released alongside the HICP, Eurostat's harmonized measure of consumer prices.

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 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, France's interest rates are set by the European Central Bank.

France 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.

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.