FR: CPI


Wed Apr 13 01:45:00 CDT 2016

Consensus Actual Previous
Month over Month 0.7% 0.7% 0.7%
Year over Year -0.2% -0.1% -0.2%

Highlights
The monthly increase in the provisional March CPI was unchanged at 0.7 percent in the final report but the annual inflation rate was still nudged a tick higher, albeit to only minus 0.1 percent. The flash HICP was unrevised and so continues to show a 0.8 percent gain versus February and a minus 0.1 percent yearly rate, matching both its mid-quarter outturn and its weakest print since February 2015.

Prices are seasonally strong in March and the introduction of new fashion lines ensured a near-12 percent jump in the cost of clothing and shoes. Total private sector manufactured goods posted a 1.9 percent rise. Fresh food (3.6 percent) was also significantly more expensive and energy charges were up 0.9 percent on the back of a 2.5 percent advance in oil. Overall services recorded a 0.1 percent increase. As a result, the (seasonally adjusted) core CPI was also only 0.1 percent higher than in February which in turn saw the annual underlying inflation rate ease from 0.7 percent to 0.6 percent.

There is little fresh news in today's French inflation report but with annual rates in both Italy and Spain also negative, three of the big four countries are still on the wrong side of zero. The ECB has much work to do.

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.