CH: Consumer Price Index

Mon Feb 12 02:15:00 CST 2018

Consensus Actual Previous
M/M % change -0.2% -0.1% 0.0%
Y/Y % change 0.8% 0.7% 0.8%

Consumer prices dipped 0.1 percent on the month in January, reducing the annual inflation rate by a tick to 0.7 percent, its first decline since June 2017.

Headline prices were depressed by imports which saw a 0.9 percent monthly drop and now stand 2.0 percent higher on the year. By contrast, domestic prices edged 0.1 percent firmer although the annual rate here was just 0.3 percent.

Seasonal weakness was apparent in clothing and shoes where the usual heavy January discounting saw prices slump fully 8.2 percent versus December. Home appliances and routine maintenance posted a 1.5 percent decrease and health was 0.7 percent cheaper. The main offsets came from petroleum products (2.4 percent), restaurants and hotels (1.7 percent) and alcohol and tobacco (0.7 percent).

The January data put the core index, which excludes fresh food and energy, down 0.5 percent from its year-end level. As a result, the underlying annual inflation rate slipped a couple of notches to 0.5 percent, equalling its lowest outturn since August. The Swiss economy looks to have started 2018 on a reasonably firm footing but the SNB still has plenty of work to do to get inflation back up to around the 2 percent mark.

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.