CH: Consumer Price Index

Mon Jan 08 02:15:00 CST 2018

Consensus Actual Previous
M/M % change -0.1% 0.0% -0.1%
Y/Y % change 0.8% 0.8% 0.8%

Consumer prices were unchanged in December, leaving the annual inflation rate also stable at 0.8 percent.

There were seasonal monthly declines in the price of food and soft drinks (0.7 percent) as well as alcohol and tobacco (0.8 percent) but this impact was essentially mitigated by gains in restaurants and hotels (0.5 percent) and clothing and footwear (0.4 percent). Most other categories were broadly flat although petroleum products advanced a further 0.5 percent. Excluding fresh food and energy, the CPI was similarly steady at its November level which was enough to add a tick to the underlying yearly inflation rate which now stands at 0.7 percent. This compares with a minus 0.3 percent rate in December 2016.

The December price data are consistent with a gradual feedthrough of the improving real economy into consumer prices. That said, the domestic CPI component is still running at just a 0.3 percent annual rate, some 2.1 percentage points short of its import counterpart. CHF weakness was the dominant element in the 2017 pick-up in Swiss inflation.

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.