FR: CPI


Wed Jul 13 01:45:00 CDT 2016

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

Highlights
The final CPI for June showed a small downward revision to its monthly change which now stands at 0.1 percent. However, there was no change to the annual inflation rate which stays at 0.2 percent, up a couple of ticks from the final May outturn.

The flash HICP was similarly shaded to a 0.1 percent monthly rise but its yearly rate was also left unchanged at 0.3 percent versus a 0.1 percent print in mid-quarter.

Food (minus 0.6 percent) and clothing and footwear (minus 1.7 percent) had the main negative effects on the monthly change in the headline index while energy (2.2 percent) provided the principal boost. Overall private sector manufactured goods prices were down 0.3 percent while their service sector counterpart climbed 0.3 percent.

The core CPI edged 0.1 percent higher on the month and was 0.7 percent firmer on the year. These results matched their respective May outturns and so leave intact a fairly flat trend in French underlying inflation. With economic growth in the second quarter probably not much better than 0.2 percent, deflation risks remain a serious threat.

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.