CH: Consumer Price Index

Mon Nov 06 02:15:00 CST 2017

Consensus Actual Previous
M/M % change 0.2% 0.1% 0.2%
Y/Y % change 0.8% 0.7% 0.7%

Consumer prices were a little softer than expected in October. A 0.1 percent monthly increase was only firm enough to leave the annual inflation rate unchanged at September's 0.7 percent, the first time that it has not accelerated since June.

As is usual for this time of the year, by far the sharpest monthly increase amongst the major subsectors was in clothing and footwear (2.5 percent). Elsewhere, prices were much more subdued, the next largest rise being only 0.4 percent in transport which was hit by a 1.7 percent spike in petrol charges. Leisure and culture (0.6 percent), home appliances and routine maintenance (0.4 percent) and food, alcohol and tobacco (0.2 percent) all saw declines.

The core CPI, which excludes energy and fresh food, also gained just a tick on the month and this too was weak enough to leave the underlying annual rate unmoved at 0.5 percent. There is nothing here to suggest any change in a broadly flat trend in core prices.

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.