Germany's final November annual inflation rate was 2.2 percent, unrevised from its flash estimate and up 0.2 percentage points versus October.The provisional 0.2 percent monthly fall was similarly unrevised. At 2.4 percent, HICP inflation also matched both its flash print and October's final reading.

Services inflation, at 4.0 percent year-over-year, significantly exceeded overall inflation, driven by increases in transport insurance (34.5 percent) and catering services (6.7 percent). However, energy prices dropped 3.7 percent year-over-year, with heating oil (minus 12.5 percent) and electricity (minus 4.1 percent) registering significant declines while food prices increased 1.8 percent, less than October's 2.3 percent rise. Core inflation (excluding food and energy) was 3.0 percent, again unrevised and so still 0.1 percentage point higher than at the start of the quarter.

Month-over-month, consumer prices fell 0.2 percent, reflecting seasonal declines in airfares (minus 15.2 percent) and holiday packages (minus 13.2 percent).

Indeed, while energy costs cool, core and services inflation continue to underscore structural challenges. Today's update puts the German RPI and RPI-P at minus 11 and minus 13 respectively. This means that economic activity in general is running slightly behind market expectations.

Forecasters look for no revision from the provisional CPI at minus 0.2 percent on the month and up 2.2 percent on year. HICP is seen unrevised at minus 0.7 percent and up 2.4 percent, respectively.

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-Wuerttemberg, Saxony, Hesse, Bavaria and Brandenburg. The preliminary estimate of the CPI follows in the same day after the last of the 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.