| Consensus | Consensus Range | Actual | Previous | |
| Month over Month | 0.8% | 0.4% | ||
| Year over Year | 1.1% | 1.1% to 1.1% | 1.6% | 1.0% |
| HICP - M/M | 0.6% | -1.0% | ||
| HICP - Y/Y | 1.6% | 1.0% |
Highlights
Consumer prices accelerated in February, rising 0.8 percent from January's 0.4 percent increase. From a year-ago, prices rose 1.6 percent, well above the 1.1 percent consensus according to an Econoday survey of economists' forecasts. In January prices were up 1.0 percent year-on-year, according to preliminary results.
Month-on-month gains were in particular due to tobacco prices which rose 3.3 percent, while recreational service prices were up 2.1 percent, and transportation up 2.0 percent from January.
The year-on-year increase was also influenced by transportation services which rose 3.0 percent from February of last year after a 0.7 percent increase the month before. Recreational services prices increased by 4.9 percent after 3.0 percent in January.
The Harmonized Index of Consumer Prices (HICP) is expected to rise 0.6 percent month-on-month and 1.6 percent year on year.
Inflation which has been subdued for some time could be perking up. Certainly, one month is not indicative of a trend, but with the conflict in the Middle East expanding beyond Iran, there are bound to be additional pressures from oil prices. Prices are still within the comfort zone of the European Central Bank, but there will no doubt be discussions among policy makers who will be tracking prices.
Market Consensus Before Announcement
CPI expected up 1.1 percent on year in the February preliminary report versus 1.0 percent in the January final.
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 the Italy 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, Italy's interest rates are set by the European Central Bank.
Italy like other EMU countries has both a national CPI and a harmonized index of consumer prices (HICP). Components and weights within the national CPI vary from other countries, reflecting national idiosyncrasies. The core CPI, which excludes fresh food, is usually the preferred indicator of short-term inflation pressures.
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.