Fri Apr 29 01:45:00 CDT 2016

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

Consumer prices provisionally fell 0.1 percent on the month in April. The unexpectedly weak performance saw annual inflation decline from minus 0.1 percent in March to minus 0.2 percent, its third consecutive negative print.

By contrast, the HICP edged up a monthly 0.1 percent which was enough to leave its yearly rate unchanged at minus 0.1 percent.

The drop in the annual CPI rate was largely attributable to manufacturing where prices were 0.6 percent lower on the year after a 0.2 percent decline in March. Services (0.9 percent) were unchanged as was food (0.4 percent) while energy (minus 6.8 percent after minus 6.9 percent) had a small positive impact.

The April data may have been hit by the early timing of Easter although this should have been reflected in a weaker showing in services. In any event, today's French report makes for some slight additional downside risk to the Eurozone April flash HICP due shortly.

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.

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.