DE: CPI


Wed Sep 13 01:00:00 CDT 2017

Consensus Actual Previous
Month over Month 0.1% 0.1% 0.1%
Year over Year 1.8% 1.8% 1.8%

Highlights
There were no revisions to the August flash CPI in the final data. Prices are still shown edging 0.1 percent higher on the month for a 1.8 percent annual inflation rate, up from 1.7 percent in the final July report and a 4-month high.

The flash HICP was similarly unrevised leaving a 0.2 percent monthly increase and a also a 1.8 percent yearly gain, up 3 ticks from its final mark in the previous month.

The modest monthly advance in consumer prices was driven by energy (0.5 percent), transport (0.4 percent) and a seasonal bounce in clothing and shoes (2.5 percent). Food (minus 0.2 percent), furnishings and household equipment (minus 0.2 percent) and recreation and leisure (minus 0.4 percent) provided the main offsets. Excluding food and energy, prices were 0.1 percent firmer versus July but, at 1.6 percent, their annual rate was a tick short of last time.

The final CPI data confirm that the headline increase in inflation last month was attributable to the more volatile basket components. Still, the underlying rate would seem to be on a slowly rising trend and a robust household sector and building pressure on capacity point to more of the same to come.

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 provide widely used measures of inflation. A provisional estimate, with limited detail, is released about two weeks before the final data are reported.

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 such as Germany 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, Germany's interest rates are set by the European Central Bank.

Germany 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. The preliminary release is based on key state numbers which are released prior to the national estimate. The states include North Rhine-Westphalia, Baden-Württemberg, Saxony, Hesse, Bavaria and Brandenburg. The release date is not announced in advance but the preliminary estimate of the CPI follows in the same day after the last of state releases. The data are revised about two weeks after preliminary release.

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.