| Consensus | Consensus Range | Actual | Previous | |
| Month over Month | 1.0% | 1.0% to 1.2% | 1.1% | 0.2% |
| Year over Year | 2.6% | 2.6% to 3.0% | 2.7% | 1.9% |
| HICP - M/M | 1.2% | 0.4% | ||
| HICP - Y/Y | 2.8% | 2.0% |
Highlights
Consumer prices are expected to rise 1.1 percent in March from their level the previous month and 2.7 percent from a year ago, a marked increase over respective gains of 0.2 percent and 1.9 percent in March. The results are slightly above the median of 1.0 percent month-on-month and 2.6 percent year-on-year as seen in an Econoday survey of economists' forecasts.
It comes as no surprise given events in the Middle East that energy prices rose 7.2 percent in March from their level a year ago. This is in stark contrast to the 1.9 percent decline seen the previous month. Food prices were also higher, but moderated to 0.9 percent from 1.1 percent in February.
Excluding energy and food, the overall prices were up 2.5 percent year-on-year in March, the same rate as the previous two months.
The Harmonized Index of Consumer Prices (HICP) shows prices will be up 1.2 percent in March over February and 2.8 percent higher year-on-year. The HICP is used to compare inflation across European economies.
Energy prices have been helping keep overall inflation in check for the better part of the year, and the conflict will continue to exert upward pressure on producer and consumer prices. Even if there is a quick resolution, the aftermath will continue to linger. Already the European Central Bank, along with the Swiss National Bank, have commented after their policy decisions earlier this month that they expect increased inflation. The question is to what extent that will crimp economic growth and led to a phase of stagflation.
Market Consensus Before Announcement
CPI expected to show increases of 1.0 percent on month and 2.6 percent on year versus 0.2 percent and 1.9 percent in February as the oil shock effect arrives.
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 provide widely used measures of inflation. A provisional estimate, with limited detail, is released about two weeks before the final data are reported.
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 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.