FR: CPI


Thu Dec 10 01:45:00 CST 2015

Consensus Actual Previous
Month over Month 0.0% -0.2% 0.1%
Year over Year 0.2% 0.0% 0.1%

Highlights
Consumer prices were weak in November. A 0.2 percent monthly fall was steeper than expected and reduced the annual inflation rate from 0.1 percent in October back to zero.

The HICP was equally soft, also declining 0.2 percent versus the start of the quarter to stand a minimal 0.1 percent higher on the year after a 0.2 percent annual rise last time.

The monthly drop in prices was mainly due to decreases in the cost of transport and services related to tourism. Part of this was just attributable to the usual seasonal factors airfares were down some 8.4 percent for example but free public transport in the Île de France region also had an impact. Overall service prices fell a monthly 0.2 percent while manufactured product charges were off 0.1 percent. Petroleum products continued to have a negative effect, decreasing 0.9 percent, making for a stable core CPI which, in turn, left its yearly rate steady at 0.7 percent.

The surprising weakness of the November data underlines the need for additional monetary accommodation and the French government will certainly not be unhappy with last week's moves by the ECB. That said, it is far from clear that the latest central bank action will prove to be enough.

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.