CH: Consumer Price Index

Wed Dec 06 02:15:00 CST 2017

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

Consumer prices fell 0.1 percent on the month in November. However, despite the dip, the annual inflation rate still rose a tick to 0.8 percent, its highest mark since March 2011.

The monthly decrease was largely due to seasonal factors and reflected in sizeable declines in clothing and shoes (0.4 percent), restaurants and hotels (also 0.4 percent) and leisure and culture (0.6 percent). Food and soft drink (minus 0.3 percent) and communications (minus 0.6 percent) also subtracted. The main rises were in home appliances and routine maintenance (1.0 percent) and alcohol and tobacco (0.4 percent).

As result, core prices, which exclude fresh food and energy, were unchanged on the month and 0.6 percent higher on the year, a tick firmer than in October.

Underlying inflation seems to be moving slowly in the right direction but mainly due to higher import costs. Domestic inflation is now running at just a 0.3 percent annual rate while imported inflation is up at 2.2 percent. Accordingly, next week's SNB policy statement likely to be relatively cautious and can be expected to reinforce the need to sustain the CHF's recent losses.

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.