| Actual | Previous | |
| Month over Month | 1.1% | 1.2% |
| Year over Year | 2.7% | 2.8% |
| HICP - M/M | 1.6% | 1.7% |
| HICP - Y/Y | 2.8% | 2.9% |
Highlights
Consumer prices increased 1.1 month-on-month in April and 2.7 percent year-on-year according to final results released today. That is lower than the preliminary estimates released earlier in the month which showed a 1.2 percent monthly and 2.8 percent yearly gain.
Harmonized consumer prices which use the same methodology across European economies, also saw prices 0.1 percentage points lower from the flash estimate, coming in at 1.6 percent month-on-month and 2.8 percent year-on-year.
Energy prices were the main driver, gaining 5.0 percent in April, and increasing 9.2 percent year-on-year. Unregulated prices for energy rose 5.4 percent from the previous month, while regulated prices were 0.3 percent lower month-on-month.
Consumers paid 0.8 percent more for food overall in April than they did in March and 2.7 percent more than they did a year ago. This came mainly for fresh food which saw a 2.0 percent increase on the month.
Core inflation which excludes energy and fresh food increased a more modest 0.5 percent month-on-month in April and 1.6 percent year-on-year. While in a range that is generally regarded as price stability, the fact remains that energy and food is something that consumers nevertheless have to pay for.
Increased prices for both will eat into other discretionary spending. The longer the conflict in the Middle East drags out, the more producers will be forced to pass along higher prices to consumers.
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.