Consumer Price Index

Previous: 0.5%
 
Forecast: 0.5%
 
Definition 
CONSUMER PRICE INDEX: An index of prices of goods and services typically purchased by urban consumers. The Consumer Price Index, commonly known by its abbreviation, CPI, is compiled and published monthly by the Bureau of Labor Statistics (BLS), using price data obtained from an elaborate survey of 25,000 retail outlets and quantity data generated by the Consumer Expenditures Survey. The CPI is unquestionably one of the most widely recognized macroeconomic price indexes, running second only to the Dow Jones Averages in the price index popularity contest. It is used not only as an indicator of the price level and inflation, but also to convert nominal economic indicators to real terms and to adjust wage and income payments (such as Social Security) for inflation.

General Effect
The Consumer Price Index (CPI) is considered a reflection to a very important aspect in the market and that is as we all know inflation. The value that lay in this index as it is the inflation measure in prices by the consumers themselves which are considered the moving wheel of the economy. This index is looked upon in various angels, the key and most important is the percentage of increase in prices in a certain time, the increase in the CPI reading is a very solid indicator of inflation that is associated with economical growth in the economy, and therefore it reflects the wellbeing state of the economy. As this is the most valuable essence it is used then to adjust wages and salaries that is the key to maintain the growth, for if the inflation level overcomes the personal earnings of individuals it affects the level of spending in the economy that consequently fiddles with the demand levels and by that the production levels.

As it is known, currency strength is merely an outcome of the current economy, as the CPI is a major index for inflation levels an increase in the number means growth and higher confidence in the economy meaning a stronger currency, which is a positive effect, for the currency will appear for investors more tempting to buy. Concerning the equity market growth means the production wheel is on the run then definitely it has as well a positive effect on the equity market, and vise versa in both case. In an exceptional case when all the economy's focus is on lowering their inflation levels a high reading in the CPI is considered a bad indicator for the economy that means adjusting their monetary policies is highly demanded to withhold the growth rate in the economy empowering it further and managing inflation risks.