FR: CPI


Thu Oct 12 01:45:00 CDT 2017

Consensus Actual Previous
Month over Month -0.1% -0.2% -0.1%
Year over Year 1.0% 1.0% 1.0%

Highlights
Consumer prices were a little softer than originally reported in September. The final data showed a 0.2 percent monthly dip, a tick sharper than the provisional estimate although the annual inflation rate remained at 1.0 percent, just 0.1 percentage points firmer than its final August mark.

The final HICP was similarly shaded a tick weaker to show a 0.2 percent monthly drop but its annual rate was also unrevised at 1.1 percent, up from 1.0 percent in mid-quarter.

The monthly headline decline was driven by a largely seasonal 1.3 percent drop in the cost of services. However, the annual rate here also eased a couple of ticks to 1.0 percent as airfare inflation dropped 1.8 percentage points to a 2.5 percent yearly rate. By contrast, manufactured goods prices fell less this year (0.5 percent) than in 2016 (0.7 percent) on the back of a smaller seasonal decline in clothing and footwear (0.7 percent after 1.3 percent).

Seasonally adjusted, the CPI was up 0.2 percent versus August. Within this, core prices were just 0.1 percent higher to leave the underlying annual rate unchanged from its 0.5 percent August reading.

The final September data leave a stubbornly flat trend in underlying inflation.

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.