CH: Consumer Price Index

November 7, 2016 02:15 CST

Consensus Actual Previous
M/M % change 0.2% 0.1% 0.1%
Y/Y % change -0.2% -0.2% -0.2%

Consumer prices were up 0.1 percent on the month in October. This left the annual inflation rate unchanged at minus 0.2 percent, its third month at this level since June.

The main upward pressure came from clothing and shoes, which posted a seasonal 3.3 percent monthly gain, and petrol, which jumped 3.0 percent. There was also a 0.5 percent rise in alcohol and tobacco. On the downside, communications and restaurants and hotels declined 0.4 percent. As a result, the core CPI which excludes unprocessed food and energy matched the 0.1 percent monthly headline rise. However, this was soft enough to see the annual underlying inflation rate drop from minus 0.1 percent to minus 0.3 percent.

Today's CPI update reaffirms the ongoing deflation problems facing the SNB and will ensure that the monetary authority stands ready to intervene to weaken the Swiss franc should tomorrow's U.S. election result prompt fresh capital inflows into the currency.

The consumer price index (CPI) is an average measure of the level of the prices of goods and services bought for the purpose of consumption by Swiss households. Monthly and annual changes in the CPI provide widely used measures of inflation. The policy target measure for the Swiss National Bank (SNB), the annual CPI rate can be distorted by swings in prices amongst the more volatile subsectors and the CPI excluding fresh food and energy is used as a better guide to underlying short-term trends. Although not a member of the Eurozone, a harmonized index of consumer prices (HICP), measured according to Eurostat's procedures, is also published alongside the CPI.

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. 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. Inflation (along with various risks) basically explains how interest rates are set on everything from loans to notes and bonds. 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.