| Actual | Previous | |
| Month over Month | 0.9% | 0.6% |
| Year over Year | 1.7% | 0.9% |
| HICP - M/M | 1.1% | 0.7% |
| HICP - Y/Y | 1.9% | 1.1% |
Highlights
Consumer prices are expected to rise 1.7 percent in March year-on-year, nearly double the rise of 0.9 percent recorded in February, according to preliminary results. On a monthly basis, they will be 0.9 percent higher than the February result of 0.6 percent.
It comes as no surprise that energy prices are behind the increase given the outbreak of hostilities in the Middle East resulting in a trickle of crude oil passing through the Straight of Hormuz. Compared to March of last year, energy prices are 7.3 percent higher after a 2.9 percent decrease the month before.
Food prices were up 1.8 percent year-on-year, a moderation from the 2.0 percent rise in February. While prices for manufactured goods fell 0.6 percent from a year ago, prices for services increased 1.7 percent.
The HICP measure used to standardize inflation across European countries is expected to increase 1.9 percent year-on-year in March after 1.1 percent in February and gain 1.1 percent month-on-month.
Rising energy prices are likely to remain sticky in the coming months, even if there is a resolution soon to the conflict. This will force consumers to make choices on their discretionary spending which likely will lead them to pare back on major purchases. While the knock-on effects will take some time to filter through the economy, the consumer will not be contributing significantly to first quarter GDP.
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 represent the main rates of inflation. The national CPI is released alongside the HICP, Eurostat's harmonized measure of consumer prices. A flash estimate was released for the first time in January 2016 and is now published towards the end of each reference month.
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 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, France's interest rates are set by the European Central Bank.
France 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.
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.