FR: CPI


Wed Sep 14 01:45:00 CDT 2016

Consensus Actual Previous
Month over Month 0.3% 0.3% 0.3%
Year over Year 0.2% 0.2% 0.2%

Highlights
Consumer prices were unrevised in the final data for August. A 0.3 percent monthly increase in the CPI followed a 0.4 percent decrease in July and left the annual inflation rate steady at 0.2 percent, its third consecutive month at this level.

A 0.3 percent monthly rise in the HICP also left its final yearly reading at 0.4 percent, in line with its both flash estimate and its final July outturn.

As indicated in the provisional statistics, the recovery in prices was essentially just seasonal and led by a 1.4 percent spike in manufacturing prices as the summer sales season drew to a close. However, this compared with a 1.6 percent bounce in the same month a year ago. Clothing and footwear jumped some 8.7 percent versus July but even this was more than a full percentage point short of its rise in August 2015. Elsewhere, service sector prices posted a modest 0.1 percent gain while energy charges were down 1.6 percent.

As a result, the core CPI was only unchanged on the month and, at 0.4 percent, a tick weaker on its annual rate. Moreover, seasonally adjusted the CPI dipped 0.1 percent from July when it was steady it June's level.

Today's report underlines the weakness of underlying trends in French consumer prices. Product markets remain very tight and with household spending only flat last quarter, profit margins look likely to be squeezed further over coming months.

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. A flash estimate was released for the first time in January 2016 and is now published towards the end of each reference month.

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.