IT: CPI


Mon Dec 14 03:00:00 CST 2015

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

Highlights
Consumer prices fell an unrevised 0.4 percent on the month in November to reduce the annual inflation rate from 0.3 percent to 0.1 percent, also as estimated in the flash report.

The HICP was adjusted just a tick stronger and what is now a 0.4 percent monthly decline put its yearly rate at 0.2 percent, down from a 0.3 percent increase in the final October data.

As previously indicated, the latest drop in the annual inflation rate was largely due to weakness in recreation, culture and personal care where prices were 0.6 percent higher on the year after a 1.4 percent rise at the start of the quarter. Food (3.2 percent after 4.1 percent) also had a restraining impact but energy (minus 11.2 percent after minus 12.7 percent) provided a modest boost. Core inflation (ex-unprocessed food and energy) was 0.1 percentage points softer at 0.7 percent.

Falling commodity prices will make for additional downside pressure on inflation this month and, in line with a number of other Eurozone countries, there is every chance that the headline rate will slide back below zero 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 provide the most closely watched measures of the inflation rate. A flash estimate is available normally in the last week of the reference month or the first week of the following month.

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 the Italy 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, Italy's interest rates are set by the European Central Bank.

Italy like other EMU countries has both a national CPI and a harmonized index of consumer prices (HICP). Components and weights within the national CPI vary from other countries, reflecting national idiosyncrasies. The core CPI, which excludes fresh food, is usually the preferred indicator of short-term inflation pressures.

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.