The CPI flash estimate y/y (Flash estimate of the consumer price index on an annual basis) is an important economic indicator that measures the change in the prices of goods and services purchased by consumers compared to the same month of the previous year. It is released by national statistical offices, such as Eurostat for the Eurozone, and serves as an early estimate of inflation before the publication of final CPI data.
Key points about fast estimation of the consumer price index (CPI) on an annual basis:
Purpose and significance:
- The CPI rapid estimation provides a preliminary indication of inflation trends, which can affect economic policy, financial markets, and consumer behavior.
- Central banks, such as the European Central Bank (ECB), use this data to make decisions about interest rates and monetary policy.
Calculation:
- The estimate is based on price data collected for a subset of goods and services included in the final consumer price index..
- It typically covers a sample that is representative of the broader economy, although it may not include all the elements that will be in the final calculation of the CPI..
Frequency and timing:
- Flash estimate of CPI is usually released on a monthly basis.
- It is published shortly after the end of the month being measured, providing an early look at inflation trends..
Impact on markets:
- Financial markets are closely watching the rapid estimation of the CPI as it can affect expectations regarding central bank actions.
- Higher-than-expected inflation readings can lead to higher interest rates, while lower-than-expected readings can have the opposite effect.
Influencing factors and market influence for annual CPI flash estimation
Factors influencing rapid estimates of the Consumer Price Index (CPI) on an annual basis
Energy prices:
- Fluctuations in oil and gas prices can significantly affect the CPI, as energy costs are a major component of consumer expenditures.
- Higher energy prices usually increase transportation and utility costs, leading to a higher consumer price index.
Food prices:
- Changes in agricultural product prices due to factors such as weather conditions, supply chain disruptions, and global demand affect the CPI.
- Food price volatility can lead to significant monthly changes in the rapid estimation of the CPI.
Housing costs:
- Rental prices and housing market conditions affect the cost of shelter, which is a key component of the CPI.
- Rising property values and rental prices contribute to higher CPI readings.
Wage growth:
- Increases in wages and salaries can lead to higher consumer spending and demand-driven inflation.
- Employers may transfer higher labor costs to consumers in the form of higher prices.
Government Policies:
- Changes in taxes, subsidies and regulations (such as VAT adjustments) can directly affect consumer prices.
- Policy measures such as rental controls or energy price caps can temporarily mitigate CPI changes.
Conversion Rate:
- A weaker national currency makes imports more expensive, contributing to a higher CPI.
- Conversely, a stronger currency could help lower the prices of imported goods and services.
Global Economic Conditions:
- Global supply chain issues, trade policies, and economic performance of trading partners affect import prices and overall inflation.
- Global commodity prices (such as metals and food) also play a role.
Seasonal factors:
- Certain times of the year experience predictable price changes, such as holiday seasons or harvest periods.
- Seasonal adjustments are made to the CPI to take into account these expected patterns.
- Market impact of Flash estimation of CPI y/y.
Polish CPI slightly higher in April
Poland’s CPI grew 2.4% y/y in April, slightly below the consensus line of 2.5% y/y and 0.4 points above the March reading, a preliminary estimate from Poland’s statistics office GUS showed on April 30.
The quick reading marks the first rise in the annual inflation rate since March 2023. Analysts expect the CPI to continue to rise due to the end of pandemic-era anti-inflation regulations, especially the phasing out of the zero food VAT rate. In April, the cap on electricity prices is scheduled to be abolished from July.
Santander Polska Bank said in a commentary: “Our baseline scenario assumes a gradual increase in inflation to around 5% at the end of the year.”
The preliminary reading also points to a decline in core inflation – price growth without food and energy – to around 4.1 percent y/y in April from 4.6 percent y/y in March, analysts say.
Analysts also say that both headline and core inflation provide the basis for the National Bank of Poland (NBP) to keep the benchmark interest rate unchanged at 5.75% until mid-2025.
Detailed data showed that food and non-alcoholic beverage prices rose 1.9% year-on-year in April, the same rate of expansion as the previous month.
Energy prices fell 2.3% year-on-year in the fourth month, and the rate of decline fell by 0.3 percentage points compared to March. GUS data also showed that fuel prices fell 1.2% y/y in April, compared to -4.5% y/y in March.
On a monthly basis, the consumer price index rose 1% in April. Food prices increased by 2.1% month-on-month. In the energy sector, prices fell by 0.4% m/m while rising by 0.1% y/y in the fuel sector.
Annual inflation in the Eurozone rises to 2.6% in May 2024
Preliminary statistics released by Eurostat, the Eurostat, show that annual inflation in the Eurozone rose to 2.6% in May 2024, compared to 2.4% in April.
In terms of the main components of inflation, the services, food, alcoholic beverages and tobacco sectors are expected to experience the highest annual inflation rates, respectively at 4.1% and 2.6%. Industrial goods not related to energy and energy sources show lower inflation rates..
These preliminary data on inflation in the Eurozone will be of interest to policymakers and financial market participants, given their impact on the ECB’s monetary policy decisions.
