FR: CPI


Thu Dec 14 01:45:00 CST 2017

Consensus Actual Previous
Month over Month 0.1% 0.1% 0.1%
Year over Year 1.2% 1.2% 1.2%

Highlights
Consumer prices were unrevised in the final report for November. A 0.1 percent monthly rise in the CPI was enough to nudge the annual inflation rate a tick higher to 1.2 percent, equalling its strongest mark since January.

The monthly flash HICP was also unrevised and so still shows a 0.1 percent monthly rise although the yearly rate here was trimmed 0.1 percentage points to 1.2 percent to match its final October print.

As previously indicated, the minor increase in annual CPI inflation was in part due to the energy subsector where the rate jumped from 4.8 percent to 5.4 percent. However, food was flat at 1.5 percent and overall manufactured products 0.1 percentage points higher at minus 0.2 percent. Inflation in services weighed in at 1.0 percent. The core CPI advanced 0.1 percent versus October for a 0.5 percent yearly rate, in line with the outturn for the previous four months.

French inflation is still uncomfortably low and underlying prices are essentially just trending sideways. However, business surveys at least suggest that pipeline pressures are on the up. So long as the real economy can sustain its current momentum, the CPI should gradually pick up steam going forwards.

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.