| Actual | Previous | |
| Month over Month | 0.5% | 0.7% |
| Year over Year | 1.7% | 1.5% |
| HICP - M/M | 1.6% | 0.5% |
| HICP - Y/Y | 1.5% | 1.5% |
Highlights
Consumer prices rose 0.5 percent in March, month-on-month, slowing from 0.7 percent in February, while increasing 1.7 percent year-on-year after rising 1.5 percent the month before.
Energy prices are 4.9 percent higher in March than in February but down 2.3 percent from a year-ago. Excluding these, prices are down 0.1 percent month-on-month and up 2.1 percent year-on-year, showing the effects of higher prices due to the conflict in the Middle East.
Core inflation which also doesn't include energy, but also strips out fresh food prices fell 0.2 percent month-on-month, while standing 1.9 percent above year-ago levels.
The Harmonized Index of Consumer Prices used to compare inflation across European economies is up 1.6 percent in March compared to February when they rose 0.5 percent. This is due to winter sales ending for clothing and footwear, a category excluded in the non-HICP reading. From a year ago, prices were 1.5 percent higher, matching the February result.
Italian inflation has been tamer than in some other European countries, and below the 2.5 percent year-on-year for the Eurozone as a while. Still, there will be no escape from further increases due to the situation in the Middle East. That will eat into consumers' discretionary spending, which will likely have a negative impact on first quarter GDP growth.
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.