Consumer Price Index (CPI)

Consumer Price Index (CPI) is one of the most important economic indicators to examine Inflation or deflation. It indicates the current prices of a basket of goods and services from the perspective of the consumer.

CPI data measure the prices of the basket of goods and service of the same period in the previous year. It shows an effect of inflation on purchasing power.

A higher than expected reading should be taken as positive or bullish for the Currency of a particular country. Lower than expected reading is negative or bearish for the currency.

Example:

The Consumer Price Index of India is higher than the expected or previous, is bullish for India stock market and Currency or vice versa

Note: – You can’t see the direct impact of CPI data on Equity, Commodity or Forex market. It shows an indirect impact.

Indicators That Impact India Stock Market

Consumer Price Index (CPI) Vs Inflation

There are many ways to calculate inflation but the Consumer Price Index is the most common way used to measure it. The other methods used for calculating inflation include Gross Domestic Product Deflator, Cost-of-living indices, Producer price indices (PPIs), Commodity price indices and Core price indices.

The Consumer Price Index measures the inflation of household items used by people in their day-to-day life.

In simple word you can say that CPI is one of the basic tools to measure Inflation.

Consumer Price Index (CPI) Vs Sensex

Increase in CPI data indicates that Inflation will increase. As a result, the price of a retail item will increase. It also increases spending and reduces the saving of people each month. At that time the consumer cuts back spending because basic expenses are too high, a recession usually follows. It means lower earnings for public companies and lower prices for their stocks. Ultimately this will show a negative impact on the stock market (SENSEX)

On the other hand decrease in CPI data indicates that Inflation will ease. As a result, the price of a daily household item will fall. It decreases spending and increases the saving of people each month. It means higher earnings for public companies and higher prices for their stocks. Ultimately this will show a positive impact on the stock market (SENSEX).