CH: Consumer Price Index

Tue Sep 05 02:15:00 CDT 2017

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

Consumer prices behaved much as expected in August. Courtesy of favourable base effects, an unchanged headline CPI on the month was enough to nudge the annual inflation rate a couple of ticks higher to 0.5 percent, matching its highest reading since March.

However, the acceleration in overall inflation was only partially reflected in the core measure which excludes fresh food and energy. This also posted no monthly change but, at 0.4 percent, its yearly rise was only 0.1 percentage points up on July. Petrol, 2.3 percent firmer, added almost 0.1 percentage points to the overall monthly change while elsewhere a sizeable, and largely seasonal, spike in clothing and footwear (1.6 percent) contrasted with falls in leisure an culture (0.5 percent) and home appliances and maintenance (0.6 percent).

The annual core inflation rate has been above zero since April but continues to show little sign of any significant acceleration. The weakness of consumer demand - see today's calendar GDP update remains a significant constraint on firms' ability to raise prices and a largely stagnant labour market argues for more of the same near-term. Today's report will again be seen by the SNB as justifying its efforts to prevent renewed CHF appreciation.

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.