The consumer price index (CPI) m/m refers to the monthly change in the overall price level of the basket of goods and services typically purchased by households. It is an economic indicator widely used to measure inflation or changes in average prices paid by consumers.
The CPI is calculated by collecting price data for a representative set of goods and services across different categories, such as housing, transportation, food, medical care, and entertainment. The number m/m represents the percentage change in the consumer price index from month to month.
A positive CPI reading monthly indicates that prices have risen compared to the previous month, while a negative reading indicates lower prices. The size of the change reflects the rate of inflation or deflation over a specific period.
Economists, policymakers, and investors closely monitor the CPI m/m as it provides important insights into inflationary pressures and changes in the cost of living. It helps assess consumers’ purchasing power and the potential impact on household budgets.
Central banks, such as the US Federal Reserve, often use the consumer price index m/m as a key metric to assess the effectiveness of monetary policy in achieving price stability. If the CPI m/m shows signs of rising inflation, central banks may consider implementing measures such as raising interest rates to reduce inflationary pressures. On the other hand, if the CPI indicates deflation or low inflation, central banks may use expansionary monetary policies to stimulate economic activity.
The consumer price index m/m is also suitable for wage negotiations, cost-of-living adjustments, and financial planning. Individuals, businesses and policymakers use this data to make informed decisions regarding investments, budget, and economic policies.
Impact of Economic, Political and Social Factors on CPI m/m
There are several factors that can affect changes in the CPI m/m (Monthly CPI):
Changes in demand and supply: Shifts in demand and supply of goods and services can lead to price changes. Increased demand or reduced supply can lead to higher prices, while lower demand or oversupply may lead to lower prices.
Cost of production: Changes in the cost of raw materials, labor, energy and other production inputs can affect the prices of final goods and services. Higher production costs often lead to higher prices for consumers.
Exchange rates: Exchange rate fluctuations can affect the prices of imported goods and services. The depreciation of the local currency can lead to higher import prices, contributing to inflation.
Government policies: Fiscal and monetary policies implemented by governments and central banks can affect inflationary pressures. For example, expansionary fiscal policies, such as increased government spending or tax cuts, can stimulate demand and possibly lead to higher inflation. Similarly, monetary policies such as interest-rate adjustments can affect borrowing costs and aggregate demand.
Consumer expectations: Consumer expectations about future price changes can influence current purchasing decisions. If consumers expect prices to rise in the future, they may increase their current spending, leading to inflationary pressures.
Supply chain disruptions: Disturbances in global supply chains, natural disasters, geopolitical events, or other shocks can disrupt the production and distribution of goods and services, leading to temporary shortages or higher prices.
Seasonal factors: Seasonal changes in demand for certain goods and services, such as clothing, heating fuel, or agricultural products, can lead to seasonal price fluctuations and affect the CPI monthly.
Taxes and subsidies: Changes in taxes or subsidies can directly affect the prices of specific goods and services, affecting general inflationary trends.
The importance of the consumer price index m/m as an economic indicator and its impact on monetary
CPI m/m (Monthly Consumer Price Index) is an important economic indicator for several reasons:
Inflation Monitoring: It helps monitor changes in the cost of living by measuring the average change over time in the prices that urban consumers pay for a basket of goods and services.
Economic stability: CPI data m/m provide insight into inflationary pressures within the economy. Rapid price increases can erode purchasing power, affecting consumer spending habits and overall economic stability.
Monetary policy: Central banks and policymakers use CPI data on a monthly basis to inform monetary policy decisions, such as setting interest rates. Rising inflation may prompt central banks to raise interest rates to calm the economy, while low inflation may lower interest rates to stimulate economic activity.
Wage adjustments: Many employment contracts and government benefits are linked to inflation rates, as measured by the consumer price index. Workers may negotiate higher wages to keep up with rising prices, while governments may adjust Social Security payments or tax brackets accordingly.
Investment decisions: Investors use monthly CPI data to assess the potential impact of inflation on different asset classes. High inflation can negatively affect fixed-income securities such as bonds, while certain sectors such as commodities may benefit from higher prices.
Business Planning: Month-on-month CPI data helps companies anticipate changes in consumer demand and adjust pricing strategies accordingly. Companies can also use CPI data to predict future costs and plan budget allocations.
Overall, the CPI m/m is a crucial tool for understanding inflation dynamics, guiding policy decisions, and making informed economic forecasts.
Report: CPI rises in April
Data from the U.S. Bureau of Labor Statistics showed that the consumer price index for all urban consumers (CPI-U) rose 0.3 percent in April, compared to the previous month, after rising 0.4 percent in March. Over the past twelve months, the index has risen 3.4 percent ahead of the seasonal adjustment.
The shelter index and the gasoline index rose in April, contributing more than seventy percent of the monthly increase in the index of all items. In contrast, the food index was unchanged in April, as the home food index fell by 0.2 percent, while the food outside home index increased by 0.3 percent.
Except for food and energy, the all-item index rose 0.3 percent in April, after rising 0.4 percent in the previous three months. Indicators that rose in April include shelter, vehicle insurance, medical care, clothing and personal care. Indexes of used cars, trucks, home furnishings, operations and new vehicles decreased during the month.
Overall, the all-item index rose 3.4 percent in the twelve months to April, a smaller increase than the 3.5 percent increase recorded in the twelve months ending in March. The index of all items except food and energy has risen by 3.6 percent over the past twelve months. As for the energy category, it rose 2.6 percent over the twelve months ending in April, while the food index rose 2.2 percent over the past year.
The market is pricing interest rate cuts of 50 basis points this year and USDJPY is trading at 155.26 with EURUSD at 1.0854.
