IT: CPI


Thu Sep 14 03:00:00 CDT 2017

Consensus Actual Previous
Month over Month 0.3% 0.3% 0.3%
Year over Year 1.2% 1.2% 1.2%

Highlights
The final CPI for August showed no revision to its provisional estimate. A 0.3 percent monthly rise in prices put the annual inflation rate at 1.2 percent, a tick stronger than its final July mark and in line with its June outturn.

Similarly, the flash HICP was unrevised with a 0.1 percent advance on the month and a 1.4 percent increase from a year ago, two ticks above its final July rate.

As previously indicated, the minor uptick in the annual CPI rate was mainly attributable to unregulated energy (4.3 percent after 2.1 percent) and transport services (4.4 percent after 3.2 percent). The core index, which excludes energy and fresh food, was also confirmed at a 1.0 percent yearly rate, a 0.2 percentage point increase versus its final mark in July.

The pick-up in underlying inflation is promising but, in the absence of a much stronger performance by consumer spending (retail sales have risen just once in the last five months) could well prove unsustainable.

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 the Italy 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, Italy's interest rates are set by the European Central Bank.

Italy like other EMU countries has both a national CPI and a harmonized index of consumer prices (HICP). Components and weights within the national CPI vary from other countries, reflecting national idiosyncrasies. The core CPI, which excludes fresh food, is usually the preferred indicator of short-term inflation pressures.

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.