CH: Consumer Price Index

Thu Oct 05 02:15:00 CDT 2017

Consensus Actual Previous
M/M % change 0.2% 0.2% 0.0%
Y/Y % change 0.6% 0.7% 0.5%

Consumer prices rose 0.2 percent on the month in September to lift the annual inflation rate by also 0.2 percentage points to 0.7 percent, its highest reading since March 2011.

Headline prices were boosted by a largely seasonal 7.4 percent monthly bounce in clothing and shoes together with a 0.9 percent increase in home appliances and maintenance. Petrol charges were also up a sizeable 2.5 percent. Elsewhere, prices were typically subdued and there were monthly falls in a number of categories, most notably leisure and culture (0.7 percent).

The core CPI, which excludes energy and fresh food, was just 0.1 percent firmer than in August although this was still enough to nudge the underlying annual inflation rate a tick higher to 0.5 percent. The latest increase in inflation will please the SNB but it will not be so happy with its composition. Domestic prices actually fell 0.1 percent on the month meaning that the overall gain was wholly attributable to import prices which jumped 1.3 percent. There is no room to reduce the current high degree of monetary accommodation.

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.