FR: CPI


Thu Mar 31 01:45:00 CDT 2016

Consensus Actual Previous
Month over Month 0.4% 0.7% 0.3%
Year over Year -0.2% -0.2%

Highlights
Consumer prices provisionally rose 0.7 percent on the month in March to leave the annual inflation rate unchanged at minus 0.2 percent.

The flash HICP was up a slightly sharper 0.8 percent versus February but this also left its 12-month rate steady at minus 0.1 percent.

The CPI's stable yearly rate masked a positive contribution from fresh food, where prices rose 1.2 percent after a 0.4 percent increase last time, and a negative impact from energy where deflation edged up from 6.8 percent to 7.0 percent. The rate for overall manufactured products was a tick weaker at minus 0.2 percent but services were unchanged at 0.8 percent.

In line with the German data released yesterday today's French inflation report may have been biased higher by the early timing of Easter. If so, next month will be subject to some downside risk.

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.