| Actual | Previous | |
| Month over Month | 1.2% | 0.5% |
| Year over Year | 2.8% | 1.7% |
| HICP - M/M | 1.7% | 1.7% |
| HICP - Y/Y | 2.9% | 1.6% |
Highlights
Consumer prices rose 1.2 percent in April, more than double the rate in March when it rose 0.5 percent, as energy prices increased sharply. Compared to a year ago, overall prices rose 2.8 percent from 1.7 percent the previous month.
Energy increased 5.3 percent in April and 9.5 percent from April of last year. Excluding energy, inflation was 0.7 percent month-on-month in April and 2.0 percent higher year-on-year. The overall index ex-energy will be small comfort to consumers who will have to spend more of their income on energy and likely result is less spending on other items.
Prices for durable goods were flat in April compared to the previous month and 0.3 percent higher than a year ago. Non-durables prices also did not grow in April, and were 0.3 percent lower year-on-year.
Italians paid 1.6 percent more for transportation than they did in March and 0.5 percent more than April of last year while for housing services they were up 0.1 percent from last month. Still, they are 4.2 percent higher than the comparable period a year ago.
The Harmonized Index of Consumer Prices was 1.7 percent higher in April than in March when it also rose 1.7 percent. Year-on-Year HICP was up 2.9 percent, a marked increase from 1.6 percent the previous month.
The verdict is in for European consumer prices with not only those for Italy above the 2.0 percent year-on-year upper threshold that the European Central Bank is comfortable with. The ECB will announce later today its decision on interest rates. While no change is expected, policy makers will have to weigh balancing fighting inflation with keeping the economy from stagnating or contracting.
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.