Thu Nov 12 01:00:00 CST 2015

Consensus Actual Previous
Month over Month 0.0% 0.0% 0.0%
Year over Year 0.3% 0.3% 0.3%

Consumer prices were unrevised in the final data for October. An unchanged reading versus September saw the annual inflation rate climb 0.3 percentage points to 0.3 percent, matching its highest mark since May and more than reversing the previous period's decline.

The HICP was also unrevised and so still shows a a flat monthly performance and a 0.2 percent yearly rise, up from a 0.2 percent decline last time.

The monthly CPI change was held in check by a 0.8 percent fall in energy, largely reflecting a 1.6 percent slide in motor fuels. However, weakness here was essentially offset by a 0.5 percent increase in food and a 0.4 percent rise in clothing and footwear. Household equipment was also up 0.3 percent. As a result, the core CPI that excludes overall energy advanced 0.2 percent versus September and at 1.4 percent, its annual rate was similarly a couple of ticks higher than at the end of the quarter.

There is little fresh news here. Further evidence that the underlying inflation picture is gradually moving in the right direction may provide the ECB with some comfort but probably not enough to prevent additional monetary easing in December.

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.

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.