Thu Feb 22 01:45:00 CST 2018

Consensus Actual Previous
Month over Month -0.1% -0.1% -0.1%
Year over Year 1.4% 1.3% 1.4%

The final CPI showed an unchanged 0.1 percent monthly dip in January and a 1.3 percent annual inflation rate, a tick short of its earlier estimate but still higher than December's 1.2 percent final mark.

The flash HICP was unrevised and so still shows a 0.1 percent monthly drop and a 1.5 percent yearly rate, up 0.3 percentage points from last time.

Food (0.3 percent) and energy (4.7 percent) both made positive contributions to the overall monthly change while manufacturing, which is seasonally soft in January, recorded a 2.2 percent decline as clothing and footwear dropped fully 12.0 percent. Seasonally adjusted, the CPI rose a sharp 0.7 percent versus December within which the core index was up 0.6 percent. This was enough to lift the annual underlying inflation rate by 0.3 percentage points to 0.9 percent.

January is a volatile period for consumer prices and the spike in the core inflation rate is very unlikely to signal a major change in trend. Still, the pick-up is in keeping with building capacity pressures on the back of strong economic growth so there should be room for inflation to accelerate at least gradually during 2018.

The consumer price index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly and annual changes in the CPI represent the main rates of inflation. The national CPI is released alongside the HICP, Eurostat's harmonized measure of consumer prices. A flash estimate was released for the first time in January 2016 and is now published towards the end of each reference month.

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. In countries where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer. As a member of the European Monetary Union, France's interest rates are set by the European Central Bank.

France like other EMU countries has both a national CPI and a harmonized index of consumer prices (HICP). The HICP is calculated to give a comparable inflation measure for the EMU. Components and weights within the national CPI vary from other countries, reflecting national idiosyncrasies.

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. 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.