FR: CPI


Thu Aug 13 01:45:00 CDT 2015

Consensus Actual Previous
Month over Month -0.4% -0.4% -0.1%
Year over Year 0.3% 0.2% 0.3%

Highlights
Consumer prices matched expectations in July. A 0.4 percent monthly fall in the CPI left the annual inflation rate a tick lower at just 0.2 percent. Core CPI edged up 0.1 percent on the month and 0.7 percent from a year ago.

The HICP recorded a 0.5 percent fall from June and was up 0.2 percent after a 0.3 percent increase last time.

The decline in the CPI was due mainly to seasonal falls in manufactured goods prices linked to summer sales, seasonal decreases in fresh foodstuff prices plus a further price reduction in energy. These decreases were partly offset by a rise in prices of some services during the summer holidays.

Headline prices were depressed by a 1.2 percent monthly drop in the energy sector, mainly reflecting a slide in oil. Fresh food (minus 4.1 percent) also had a negative impact. Elsewhere in the basket the other main monthly moves came from clothing and shoes (minus 14.4 percent) and health products (minus 0.4 percent). Transport and communication jumped 3.8 percent.

The July update leaves an essentially unchanged picture of French inflation. In line with most other Eurozone members, the risk of a prolonged period of deflation has receded but in general the outlook for prices remains soft due to a lack of corporate pricing power. This seems unlikely to change anytime soon.


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.