FR: CPI


Wed Oct 14 01:45:00 CDT 2015

Consensus Actual Previous
Month over Month -0.3% -0.4% 0.3%
Year over Year 0.1% 0.0% 0.0%

Highlights
The CPI was a little weaker than expected in September. A 0.4 percent monthly decrease more than reversed August's 0.3 percent rise but left the annual inflation rate unchanged at 0.0 percent.

The HICP also dropped 0.4 percent from mid-quarter when it advanced by an equivalent amount. Yearly inflation was stable at 0.1 percent, matching its lowest mark since March.

Energy charges were down a full 1.0 percent on the month within which oil was off 2.2 percent. Private sector manufacturing product prices rose 1.4 percent as clothing spiked 7.7 percent on the back of new season fashion lines. However, services posted a 1.6 percent decline with transport and communication sliding 4.6 percent and the other services category 1.8 percent lower.

Overall prices are seasonally weak in September as the impact of the end of the summer holiday period on the services sector typically more than offsets a seasonal increase in manufactured goods charges. However, even seasonally adjusted the CPI fell 0.1 percent on the month, its fourth straight decline. While only small and largely attributable to declining oil prices, the ongoing slide warns that deflationary risks are still a sizeable threat to the French economy. There is nothing here to dent speculation about a step-up in QE from the ECB over coming months.

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.