FR: CPI


Thu Apr 12 01:45:00 CDT 2018

Consensus Actual Previous
Month over Month 1.0% 1.0% 1.0%
Year over Year 1.5% 1.6% 1.5%

Highlights
Consumer prices posted an unrevised 1.0 percent monthly bounce in the final data for March. However, the annual inflation rate was still revised a tick firmer and, at 1.6 percent, was up 0.4 percentage points from its final February mark.

The final HICP matched its flash estimates and so still shows a 1.1 percent increase versus mid-quarter and a 1.7 percent yearly rate, also 0.4 percentage points higher than last time.

The acceleration in the annual CPI rate was largely due to a sharper rise in services (1.4 percent after 1.1 percent) where package holiday inflation jumped from 0.6 percent to 16.2 percent due to a shift in school holidays. This impact should prove only temporary. Otherwise, food (1.5 percent after 0.8 percent) and tobacco 16.6 percent after 4.9 percent) which was hit by an increase in taxes, also provided significant support. By contrast, manufacturing (minus 0.3 percent after 0.1 percent) dipped back into deflationary territory.

Prices are seasonally strong in March but even adjusted for such factors the CPI rose a firm 0.5 percent on the month. However, at least part of this will reflect temporary or one-off factors and the underlying picture remains soft. The core CPI was up 0.3 percent versus February which put its yearly rate at 0.9 percent, just a tick higher than last time.

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.