CH: Consumer Price Index

July 6, 2017 02:15 CDT

Consensus Actual Previous
M/M % change 0.0% -0.1% 0.2%
Y/Y % change 0.3% 0.2% 0.5%

Consumer prices were slightly softer than expected in June. A 0.1 percent monthly dip was the first outright decline since December 2016 and weak enough to reduce annual inflation by 0.3 percentage points to 0.2 percent, its lowest mark so far this year.

Most categories registered monthly declines, notably clothing and footwear where prices dropped a largely seasonal 2.2 percent and alone subtracted almost 0.1 percentage points off the overall change. Home appliances and maintenance (minus 0.6 percent) and transport (minus 0.5 percent) were also particularly weak. Petrol was down 1.5 percent. The only increase of any size was in leisure and culture (0.8 percent).

As a result, the core CPI, which excludes fresh food and energy, matched the monthly headline drop to leave the annual underlying rate steady at 0.2 percent.

Despite the surprisingly soft June data, a second quarter inflation rate of 0.4 percent was still a tick firmer than the estimate contained in the SNB's June Monetary Policy Assessment. However, the overshoot is far too small to have any implications for policy which is set to remain highly accommodative for some considerable while yet.

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.