DE: CPI


Fri Sep 11 01:00:00 CDT 2015

Consensus Actual Previous
Month over Month 0.0% 0.0% 0.0%
Year over Year 0.2% 0.2% 0.2%

Highlights
Consumer prices were unrevised in the final data for August. A flat reading on the month made for a 0.2 percent yearly rate, also as indicated in the flash report and matching the final print for the start of the quarter.

The HICP was similarly unrevised and so still shows no change versus July and a 0.1 percent annual rate, again in line with last time.

Steady annual CPI inflation masked higher rates in clothing and shoes (1.4 percent after 0.9 percent) and food and non-alcoholic drinks (0.6 percent after 0.4 percent) but lower rates in transportation (minus 1.7 percent after minus 1.0 percent) and education (minus 1.1 percent after minus 0.9 percent). The core CPI (excluding household energy and motor fuels) rose 0.2 percent on the month and, at 1.1 percent, its yearly rate was a tick up on July.

Overall the final August figures would seem to confirm that underlying German inflation trends are moving in the right direction, albeit only slowly. The ECB's near-2 percent HICP target remains some was off but, subject to further marked weakness in the oil market, the central bank should not be unhappy.

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.