Inflation expectations in Singapore inched up to 2.7 per cent from a five-year low of 2.63 per cent recorded in September 2016, a December 2016 survey by Singapore Management University (SMU) showed.
The new one-year-ahead median inflation is still lower than its historical average of 3.5 per cent and the more recent fourth quarter average of 2.72 per cent, the latest survey for Singapore Index of Inflation Expectations (SInDEx) found.
Consumers polled in December 2016 were swayed by weakness in global growth, exacerbated by the uncertainties of global trade in the US and eurozone following the unexpected US presidential election outcome and Brexit referendum, the media release said.
A stabilising pound sterling and a slowly appreciating US dollar had an impact on the trade weighted Singapore dollar exchange rate, it noted.
Improving US demand and the consequent increase in oil and commodity prices meant that there was some, though moderate, risk from imported inflation.
This could potentially uplift prices, particularly core inflation (which excludes costs of accommodation and private road transport) in Singapore, it noted.
Pass-through costs for consumers were slightly higher as well, with a slight increase in accommodation costs, unchanged private road transport costs and slackening of labour market tightness, it said.
SMU assistant professor of finance Aurobindo Ghosh, who is the principal investigator of the SInDEx project, said: “Global growth is at a crossroads, with the nascent growth in the US seemingly a beacon of better days ahead.
“Any protectionist mindset might translate to a loss of opportunity of the stimulus spending and consequent continuation of the aftermath of the global financial crisis.
“Against this backdrop, it is to be expected that the consumers of a trade-dependent economy like Singapore would prepare for possible increase in overall price levels.”
The twenty-second wave of the quarterly survey was conducted online and polled about 500 randomly selected individuals representing a cross section of Singapore households.
They shared their views on expectations of inflation-related variables over the next year and next five years.
The five-year-ahead median headline inflation, or CPI-All Items inflation, in the December 2016 survey inched up to 3.5 per cent from 3.43 per cent in the previous quarter.
Meanwhile, one-year-ahead median core inflation expectations in Singapore jumped to 2.82 per cent from its lowest ever recorded average of 2.47 per cent in September 2016, since the survey’s inception in September 2011.
The five-year-ahead median core inflation rate in Singapore rose to 3.36 per cent in December 2016 from 3.13 per cent in September 2016.
Singapore’s headline inflation in November 2016 crept up to 0 per cent year-on-year – the first non-negative reading in two years – from negative 0.1 per cent in October 2016.
Core inflation crept higher as well to 1.3 per cent last month, compared to 1.1 per cent the month before.
The Department of Statistics will announce the inflation rate for December 2016 next Monday.
chaihyn@sph.com.sg
This article was first published on January 17, 2017.
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