CH: Consumer Price Index

Mon Aug 07 02:15:00 CDT 2017

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

Consumer prices posted their usual fall in July. A 0.3 percent monthly drop was in line with expectations and small enough to nudge the annual inflation rate a tick higher to 0.3 percent.

As is typical in July, a seasonal slide in the price of clothing and footwear (8.1 percent) had the most significant impact on the overall CPI and essentially accounted for its entire monthly decline. Elsewhere it was more mixed with a 1.0 percent rise in food and drink offsetting a 0.5 percent decrease in restaurants and hotels and an equivalent fall in home appliances and maintenance. Petrol was also down 1.0 percent.

The core CPI, which excludes fresh food and energy, matched the headline index implying a 0.1 percentage point rise in the annual underlying inflation rate to 0.3 percent. Prospects for further gains here have been boosted by the combination of a significantly weaker CHF and the rebound in oil prices. The SNB should be cautiously happy with recent developments but will still want to see the CHF lose further ground.

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.