One of the most widely used economic terms at the moment is the IPC. But do we really know its true meaning? Well, it corresponds to the acronym for consumer price index, and it is the numerical value that reflects the variations in prices in a given period. With a certain influence on the equity markets and the evolution of the stock market values. From this general scenario, it can become a very reliable parameter to enter or exit the financial markets with certain guarantees of success.
The CPI is also a very important piece of information for the review of wages and pensions in our country. Being decisive for its growth, especially if the levels of the consumer price index are very high. Even to determine the monetary politics of a country or geographical area, and in this sense the best example is the role that the European Central Bank (ECB) has been developing to promote growth in the euro area. And previously to get out of the serious economic crisis that took place between 2007 and 2008.
On the other hand, the consumer price index is also very determining to have as a reference source what is commonly known as the "shopping basket". Because in effect, through the CPI we know how is the evolution of this important part of the so-called domestic economy. And in any case, it will influence the preparation of the family or personal budget, as all users know. Therefore, the consumer price index has many more implications than you can imagine from the beginning.
Evolution of consumer prices
The annual rate of the general Consumer Price Index (CPI) in the month of January is 1,0%, two tenths lower than that registered the previous month, according to the latest ones provided by the National Institute of Statistics (INE). with negative influence that stand out in the decrease in the annual rate are the following:
Food and non-alcoholic beverages, which decreases its annual variation four tenths and places it at 0,9%, due to the stability of the prices of fish and shellfish, compared to the rise registered in 2018. It should also be noted, although in the opposite direction, the increase in the prices of legumes and vegetables, which decreased last year, in the opinion of this official report.
Bus Routes, with a rate of –0,2%, four tenths below that of the previous month, as a result of the fact that the prices of fuels and lubricants rose less this month than in January 2018.
Leisure and culture, whose annual variation decreased eight tenths, to –0,9%, due to the decrease in the prices of tourist packages, which is greater this month than in January of the previous year.
Negative impact on the index
In this sense, there are some segments that have generated less satisfactory data in this period and that have had an impact on the cost of living that has grown. As for example, the is that we expose below:
Dress and footwear, with a rate of –15,4%, which reflects the effect of the winter sales. Its impact on the general CPI is –1,037.
Leisure and culture, whose variation of –2,3% has an effect of –0,190, and is motivated, for the most part, by the decrease in prices of tourist packages.
Housing, which presented a rate of –0,6% and an effect of –0,076, as a result of the drop in gas prices and, to a lesser extent, diesel for heating and electricity.
Household, which places its variation at –0,5%. The reduction in the prices of home textile items stands out in this evolution. The impact of this group on the general index is –0,028.
Hotels, cafes and restaurants, whose rate of –0,2%, which has an effect of –0,022, is caused by the decrease in the prices of accommodation services. It is also worth noting, although in the opposite direction, the rise in prices for restaurants.
Rates by autonomous communities
Another of the most relevant aspects to take into account in the consumer price index is that it is not uniform. If not, on the contrary, varies from one autonomous community to another and sometimes with an intensity that draws a lot of attention, both to economists and to the users themselves. In this sense, and according to the latest official data provided by the National Institute of Statistics (INE), it is shown that the annual rate of the CPI decreases in 14 autonomous communities in January compared to December and is maintained in the remaining three.
The greatest decrease occurs in Castilla-La Mancha, with a drop of five tenths. For their part, the communities that maintain their annual rate are Illes Balears, Comunidad Foral de Navarra and País Vasco. As a sign of flexibility in the economy and that the entire CPI as a whole determines one of the most relevant parameters on the state of health of a national economy. As for example, in this case the Spanish one. Beyond other technical considerations that should be analyzed in another article on the consumer price index.
Harmonized Price Index (HICP)
It is another variant of the consumer price index and it refers to a statistical indicator of special relevance and whose objective is to provide a common measure of inflation that allows international comparisons to be made. So that in this way it is also possible to examine the compliance that the Maastricht Treaty for entry into the Monetary Union. From this point of view, it may be an economic parameter that has a greater influence on the cost of living in a country.
On the other hand, it should be noted that last January the annual variation rate of the HICP stood at 1,0%, two tenths below that registered the previous month. Therefore, the monthly variation of the HICP in this analyzed period is –1,7%. While on the contrary, in the month of January the annual variation rate of the CPI to Constant Taxes (CPI-IC) stands at 0,9%, one tenth less than that registered by the general CPI. The monthly variation rate of the CPI-IC has been –1,4% in this analyzed period. For its part, the HICP at Constant Taxes (HICP-IC) presents an annual rate of 1,0%, the same as that of the HICP.
Different price indices
As you may have seen in this article, one of the characteristics of the CPI is that it is presented under different formats, such as Constant Taxes (IPCA-IC). And that will help to have a much more real vision about the state of family economies. Not surprisingly, only the increase in the shopping cart, but the real state of the mortgage loans or even the expense that takes place in pharmaceutical products. And that can be used for governments to take economic measures or even labor or aid measures for the most disadvantaged sectors of society.
Therefore, the consumer price index is much more relevant than many users initially believe. Unlike your influence on investments developed in equity markets. Where its incidence is decreasing for different causes that will be the subject of other articles. In any case, it does not help excessively for stock prices to rise or fall based on these economic parameters. As has been seen in the main indices of the equity markets.
Business results on the stock market
The purely business results of companies listed on equity markets have much more impact on the stock market. In this sense, a very important piece of information is that the companies that make up the Ibex 35 closed last year with a increase in profits. These data include the results of the 35 companies that make up the selective. Listed companies have managed to overcome more complex quarters and the difficult economic environment they are going through. But the rate of growth of its profit has been slowed in relation to the twelve months of 2017.
Companies in the electricity sector again led profits, with increases of around 5%, and with revenue growth of 9%, compared to 4% in costs. These are data that are more followed by small and medium-sized investors that have a greater impact on the economic health of the companies themselves than on the increase in cost of life. And that can also be applied to other international equity markets, as has been shown in recent years. And that determine that a moment there is a buying or selling pressure.
Listed companies have managed to overcome more complex quarters and the difficult economic environment they are going through. But the rate of growth of its profit has been slowed in relation to the twelve months of 2017.