DE: CPI


Tue Apr 12 01:00:00 CDT 2016

Consensus Actual Previous
Month over Month 0.8% 0.8% 0.8%
Year over Year 0.3% 0.3% 0.3%

Highlights
There were no revisions to the provisional CPI data in the final report for March. Prices rose 0.8 percent on the month for a 0.3 percent annual inflation rate, up fully 3 basis points from the final mid-quarter print but probably biased higher by an early Easter.

The final HICP also matched its flash estimate which similarly showed a 0.8 percent increase versus February and a 0.1 percent yearly rate following a 0.2 percent decline last time.

Evidence of the impact of Easter was apparent in a 10.1 percent bounce in package holiday costs which saw their annual rate jump to 7.1 percent from a 5.7 percent decline in February. There was also a positive effect from food and drink where the yearly change advanced from 0.7 percent to 1.1 percent and from household energy (minus 6.5 percent after minus 7.3 percent). Excluding overall energy, the CPI rose 0.7 percent on the month, enough to lift the annual core rate from 0.9 percent to 1.4 percent.

There is nothing particularly new in today's data and the lack of any headline revisions increases the likelihood of an unrevised March Eurozone inflation print on Thursday.

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 widely used measures of inflation.

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 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.