FR: CPI


Fri Apr 27 01:45:00 CDT 2018

Consensus Actual Previous
Month over Month 0.1% 0.1% 1.0%
Year over Year 1.6% 1.6% 1.6%

Highlights
Consumer prices provisionally rose 0.1 percent on the month in April. This left the annual inflation rate unchanged at 1.6 percent.

The flash HICP similarly advanced 0.1 percent versus March although this was enough to lift its yearly rate by a tick to 1.8 percent.

The stability of the annual CPI rate was largely due to energy where inflation climbed fully 1.2 percentage points to 6.2 percent. Food (1.6 percent after 1.5 percent) also provided a small boost. However, increases here masked a dip in services (1.3 percent after 1.4 percent) while the manufactured products rate was only flat and so still in negative territory (minus 0.3 percent). Consequently, core inflation probably slipped back having edged up to 0.9 percent in March.

The early Easter probably biased up headline inflation last month and a reversal would have been seen this month but for the jump in commodity prices. Underlying trends remain soft which is doubly ominous in the wake of the sharp slowdown in economic growth reported for the start of the year (see today's flash GDP calendar entry).

Definition
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.

Description
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.