FR: CPI


Wed Nov 15 01:45:00 CST 2017

Consensus Actual Previous
Month over Month 0.1% 0.1% 0.1%
Year over Year 1.1% 1.1% 1.1%

Highlights
Consumer prices were unrevised in the final report for October. A 0.1 percent monthly increase was in line with the provisional estimate and so left the annual inflation rate at 1.1 percent, up just a tick from its final September reading.

The flash HICP was similarly unrevised and so still shows a 0.1 percent monthly advance and a 1.2 percent yearly increase, also 0.1 percentage points higher than its final September print.

The monthly headline gain reflected a 0.4 percent rise in food and a 1.0 percent bounce in energy, all but offset by a 0.2 percent drop in services. Seasonally adjusted, the CPI was also 0.1 percent firmer on the month after a 0.2 percent increase in September but the core index was only flat. This made for a 0.5 percent annual underlying rate, matching the outturn of the previous three months.

The underlying inflation picture remains soft with the core rate just trending sideways. The step-up in economic momentum since the start of the year should make for some upside pressure in due course but with unemployment still high (9.7 percent in September), this could take some while to feed through into actual prices.

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.