FR: CPI


Fri Jun 30 01:45:00 CDT 2017

Consensus Actual Previous
Month over Month 0.0% 0.0% 0.0%
Year over Year 0.7% 0.7% 0.8%

Highlights
Consumer prices were provisionally unchanged on the month in June which put the annual inflation rate at 0.7 percent, down from 0.8 percent in May and its lowest mark since last December. The outturn was in line with market expectations.

The flash HICP was similarly flat at its level in May which also reduced its yearly rate by a tick to 0.8 percent.

Within the CPI basket, annual inflation in energy dropped from 5.3 percent in mid-quarter to minus 3.1 percent and significantly weighed on the headline print. However, food (0.6 percent after 0.4 percent) provided a partial offset. More generally, the rate in manufacturing climbed from minus 0.7 percent to minus 0.5 percent while services edged a tick firmer to 1.0 percent.

Outside of the more volatile categories the signs are that inflation was probably little changed this month. Economic activity seems to be picking up some steam but product markets remain very competitive and underlying prices will probably struggle to make any real headway for some time yet.

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.