Fri Apr 13 01:00:00 CDT 2018

Consensus Actual Previous
Month over Month 0.4% 0.4% 0.4%
Year over Year 1.6% 1.6% 1.6%

The provisional CPI was unrevised in the final data for March. This left a 0.4 percent monthly rise in prices and a 1.6 percent annual inflation rate, up from 1.4 percent in the final February report and the first yearly increase since last November.

The final HICP similarly matched its flash estimate, also leaving a 0.4 percent monthly gain and a 1.5 percent annual rate after a 1.2 percent posting in mid-quarter.

However, the acceleration in the yearly headline rate was largely due to the more volatile components and excluding food and energy inflation was only flat at 1.6 percent. Food (2.9 percent after 1.1 percent) provided most of the boost alongside a smaller contribution from energy (0.5 percent after 0.1 percent). In addition, an early Easter this year probably provided some help as prices were raised in anticipation of the holiday period (package holiday charges were up 2.0 percent on the month).

In other words, underlying inflation developments were probably little changed last month. The trend rate is rising, but only slowly.

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 provide widely used measures of inflation. A provisional estimate, with limited detail, is released about two weeks before the final data are reported.

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 such as Germany 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, Germany's interest rates are set by the European Central Bank.

Germany 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. The preliminary release is based on key state numbers which are released prior to the national estimate. The states include North Rhine-Westphalia, Baden-Württemberg, Saxony, Hesse, Bavaria and Brandenburg. The release date is not announced in advance but the preliminary estimate of the CPI follows in the same day after the last of state releases. The data are revised about two weeks after preliminary release.

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.