FR: CPI


Thu Nov 12 01:45:00 CST 2015

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

Highlights
French inflation edged up in line with expectations in October. A 0.1 percent monthly increase in the CPI was enough to lift its annual rate by just a tick to also 0.1 percent, its first positive reading since July.

The HICP similarly advanced 0.1 percent versus September which, in turn, boosted its yearly rate from 0.1 percent to 0.2 percent, matching its strongest mark since June.

October's minimal monthly gain was mainly a reflection of more expensive food (0.5 percent) as fresh produce jumped fully 3.3 percent. However, other goods charges were typically weak and overall manufactured products saw no change versus September. Energy (minus 0.6 percent) served to keep overall prices in check as petroleum dropped 0.9 percent while service sector prices were 0.1 percent higher than at the end of last quarter. At 0.7 percent, the annual core inflation rate was only marginally firmer than September's 0.6 percent print.

Seasonally adjusted, the CPI last month was still 0.3 percent below its May peak and the ongoing weakness of actual prices continues to dampen household inflation expectations. This in turn poses a very real threat to prospective consumer spending as would-be purchases are deferred in anticipation of lower prices. There is no good news here for the ECB.

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.