FR: CPI


Wed Dec 14 01:45:00 CST 2016

Consensus Actual Previous
Month over Month 0.0% 0.0% 0.0%
Year over Year 0.5% 0.5% 0.5%

Highlights
French inflation was confirmed at its provisional estimate in November. An unrevised flat monthly performance by the CPI left its final annual rate at 0.5 percent, up a tick from its October print and its highest reading in more than two years.

The HICP also saw no amendments so its monthly rate similarly stays at 0.0 percent and its yearly rise at 0.7 percent, up 0.2 percentage points from the start of the quarter and its strongest print since May 2014.

The monthly stability of the CPI reflected higher charges for energy (0.9 percent) and food (0.1 percent) essentially offset by declines in services (0.2 percent) and manufactured goods (0.1 percent). Overall seasonally adjusted prices were a tick higher than at the start of the quarter when they were just flat. The core index also edged 0.1 percent firmer but this was only enough to see the annual underlying rate steady at a lowly 0.5 percent.

The final November data simply reinforce the impression of weak of inflationary pressures in general and soft underlying trends in particular.

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.