Monthly archive

• One-year-Ahead headline inflation expectations remained unmoved at 3.8% in December 2024 compared to September 2024. Consumers’ headline inflation expectations, trending downwards since June 2023, have remained unchanged since the June 2024 survey. The fourth quarter One-year-Ahead inflation expectations continue to be slightly elevated compared to the average fourth quarter One-year-Ahead headline inflation expectations of 3.3% since the inception of this index in the third quarter of 2011.
• As a comparison benchmark, data from the Monetary Authority of Singapore Survey of Professional Forecasters (MAS SPF) released in December 2024 (based on November 2024 data) showed that the median forecast of the Consumer Price Index (CPI)-All Items inflation for 2024 was 2.5% (for 2025, 1.9%), while MAS Core Inflation median forecast was 2.8% (for 2025, 1.8%) (MAS SPF December 2024, Table 2 and Table A.4). The latest CPI data release from the Department of Statistics showed that CPI-All Items rose by 2.4% between January and November 2024, compared to the same period in 2023, with the latest November 2024 monthly headline or all items inflation print coming in at 1.6% year-on-year, while the MAS Core Inflation Measure was 1.9% (DOS CPI, December 2024). On 14 October 2024, in their fourth and final quarterly policy review in 2024, MAS maintained the rate of appreciation of the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) policy band, following five consecutive tightening moves between October 2021 and October 2022 (MAS Monetary Policy Statement, Oct 2024). The current appreciating path of the S$NEER policy band is intended to continue to reduce imported inflation and help curb domestic cost pressures, thereby ensuring medium-term price stability. The next monetary policy statement will be announced by January 2025.
• The overall Consumer Price Index Inflation Expectations (CPIEx), after accommodating potential component-wise behavioural biases and re-combining across components, increased to 4.4% in December 2024 from 4.1% in September 2024. One-year-Ahead inflation expectations of major components of CPI mostly remained unchanged, namely in components like Food (at 4%), Transportation (at 4%), Healthcare (at 5%), Education (at 4%), Household Durables & Services (at 4%), Recreation & Culture (at 4%), Clothing & Footwear (at 4%). On the other hand, Housing & Utilities (from 4% to 5%) and Miscellaneous Goods & Services including Personal Care (from 4% to 5%) and Communications (from 3.2% to 4%) inched up. With some increase, this broad-based stability in component-based inflation expectations, signals that despite the restrictive monetary policy environment that is in place, geopolitical uncertainty might be pushing inflation expectations in some components slightly higher.
• The survey team also polled free-response overall inflation expectations, after accommodating potential behavioural biases by informing respondents of current aggregated economic data. We found that the One-year-Ahead headline inflation expectations remained unchanged at 4% in December 2024 compared to September 2024. These free-response polls help us to gauge perceptions of anchoring of inflation expectations and consumer sentiments in an aggregated sense.

• In the December 2024 survey, continuing since June 2022, we took a more forward-looking approach in analysing the impact of global economic developments on Singapore’s economic growth and inflation.

  • Overall, responding to multiple sources of uncertainty and fragilities in the global order, including ongoing conflicts, strategic geopolitical tensions and policy uncertainty affecting global trade, Singaporean consumers surveyed in December 2024 expected a slight negative impact on the country’s economic growth over the next 12 months.

  • In addition, Singaporean consumers also opined in the December 2024 survey that over the next 12 months, their overall expenses are expected to increase slightly.

  • In the December 2024 survey, around 47.3% (compared to 44.8% in September 2024) of Singaporeans surveyed expect inflation to decline in the medium term of one year. This contrasts with 43.2% (compared to 44.6% in September 2024) who felt that One-year-Ahead inflation will increase. This shows some level of uncertainty about global growth and cautious optimism that the tighter monetary policy might be able to rein in inflation.

  • In December 2024, the main reason cited by those expecting inflation to decline is the slowdown in global growth (38%), followed by the role of central banks in keeping interest rates high (30.2%). A distant third, given by 15.7% of respondents, was the resolution of supply chain disruptions. Among respondents expecting inflation to increase over the next 12 months, there was a greater variety of perceived reasons. The most common one cited was the impact of higher interest rates by the central banks of major economies (30.9%). This was followed by geopolitical uncertainties due to the conflicts between Hamas and Israel, and Ukraine and Russia (17.2%), as well as fiscal measures such as the hike in GST (15%). Supply chain disruptions (14.2%) and high demand due to the relaxation of pandemic-era measures (13.7%) were cited as other possible reasons.

  • In the December 2024 survey, respondents opined that current economic conditions have a slight downward or negative impact on the One-year-Ahead and Five-year-Ahead overall inflation expectations. Component-wise, respondents expect slight negative impact on inflation related to Food, Transportation and Housing & Utilities, while they expect no discernible impact on Healthcare, Education, Household Durables & Services, Recreation & Culture, Communications, Clothing & Footwear, and Miscellaneous Goods & Services. We observe a significant variation of perspectives, possibly due to lived experience or behavioural bias among the respondents, which results in bimodal distributions with one segment of the population expecting a decline in inflation while another expecting an increase in inflation, both in overall and component-wise measures.

• Alberto Cavallo of Harvard Business School (Cavallo, 2020) and European Central Bank (Kouvavas et al., 2020) highlighted potential biases in CPI calculations with fixed baskets as respondents made substantive changes to their consumption baskets owing mainly to the COVID-19 pandemic. Singapore consumers polled in the December 2024 survey said in the next 12 months, they expect no change in budget share of expenses for Education, Recreation & Culture, Communications and Miscellaneous Goods & Services. However, the respondents expect a slight increase in the budget share of expenses in Food, Transportation, Housing & Utilities, Healthcare, Clothing & Footwear and Household Durables & Services. These results indicate that respondents expect their consumption baskets to change over the next 12 months, with a higher budget share on certain components. These changes in budget share can potentially be due to more permanent changes in consumption behaviour and lifestyle in the post-pandemic era, like the practice of working from home regularly or ordering groceries online, rather than buying them in-store.

• Excluding the volatile components of Accommodation and Private Transportation, the One-year-Ahead CPIEx core inflation expectations in the SInDEx survey decreased slightly to 3.9% in December 2024 from 4.0% in September 2024. This suggests that Accommodation and Private Transportation likely experienced either greater increases or smaller declines in prices compared to other components of the CPI.

• For a subgroup of the population who owns their accommodation and uses public transport, the One-year-Ahead CPIEx core inflation expectations pared to 3.7% in December 2024 compared to 3.8% in September 2024, verifying the robustness of the findings in core inflation expectations. This sub-sample measurement is potentially more representative and hence more accurate than the full sample measurement, due to high home ownership and public transport ridership in Singapore. 

• Unlike the fixed radio-button response which might be susceptible to various behavioural biases, the free-response core CPIEx Inflation Expectations (excluding Accommodation and Private Transportation expenses) rose slightly. After adjusting for potential component-wise behavioural biases and re-combining across components, the core-CPIEx Inflation Expectations (excluding Accommodation and Private Transportation) increased to 4.2% in December 2024 compared to 4.1% in September 2024. The free-response core CPIEx, also increased to 4.0% in December 2024 compared to 3.5% in September 2024. This divergence among these cognitive measures of perception of inflation expectations suggests a heightened sense of uncertainty among the respondents. We also need to be cognisant that addressing some changes in price levels, individual households often adapt to current conditions and update their baskets accordingly. Having said that, we need to be mindful that fixed basket calculations like CPI can give us potentially higher inflation figures. A more representative and less volatile measure might be the core per capita consumption expenditure (core PCE) preferred by central banks like the Federal Reserve Board. 

• The One-year-Ahead composite index SInDEx1 that puts less weight on more volatile components like Accommodation, Private Road Transport, Food and Energy-related expenses also declined to 3.8% in December 2024 compared to 3.9% in September 2024 survey. It continued to be higher than the fourth quarter average of 3.3% since the inception of the survey.

• In addition, in December 2024, 5.1% of Singaporeans polled expect a more than 5.0% reduction in salary in the next 12 months. This is slightly lower than 7.1% in the September 2024 survey, so an improvement in the job outlook was detected. The expectation of median salary increments in December 2024 of between 1.0% to 5.0% remained unchanged, compared to the September 2024 survey.

^{Figure 1: One-year-Ahead inflation expectations: The chart shows the quarterly DBS-SKBI CPIEx (CPI-All Item) and DBS-SKBI CPIEx Core (Excluding Accommodation and Private Transportation components) One-year-Ahead Inflation Expectations polled in the quarterly online Singapore Index of Inflation Expectations (SInDEx) Survey conducted on a representative sample of Singaporean residents between 16 December and 23 December 2024. Source: SKBI, SMU, MAS-MTI, Department of Statistics}

DBS Bank Chief Economist and Managing Director of Group Research, Dr Taimur Baig, commented, “After several years of high inflation, the second half of 2024 brought substantial price relief to Singapore’s residents. With a substantial rally of the US dollar (USD) in recent months, Singapore’s inflation outlook might be a bit more challenging on the margin, but there are mitigating circumstances. Other currencies have sold off against the USD as well, supporting the SGD NEER index. Inflation expectations are largely stable, albeit on the high side. Trump 2.0 and impending tariffs are looming over Singapore and other trade-intensive nations.”

Dr Aurobindo Ghosh, Assistant Professor of Finance at Singapore Management University (SMU), the creator and the founding Principal Investigator of the Quarterly DBS-SKBI SInDEx Project, observed, “Having recovered from a once-in-a-century pandemic, some of the vestiges of the pandemic-era measures like lifestyle changes seem to be persistent which might have some lingering impact on cost-of-living. This has been exacerbated by episodes of supply chain disruption, fuel price surges, protectionist policies owing to geopolitical bifurcation between the two largest economies and strategic alliances, and continued conflicts between Hamas-Israel or Ukraine-Russia, though some light seems to be at the end of the tunnel. Both the World Bank and the International Monetary Fund, project some stability in growth, though it is “underwhelming.”

“A Great Tightening” of monetary policy of central banks of most major economies is bearing fruit in taming rampant global inflation, without precipitating a global recession, although uncertainty remains and causes policymakers to be cautiously optimistic of the future outlook and the normalisation to a more accommodative monetary policy. Against this backdrop, the quarterly SInDEx survey among a representative sample of Singapore consumers reveals Headline Inflation Expectations seem to be holding steady for half a year after gradually declining. The One-Year-Ahead MAS Core inflation expectations, which exclude volatile and policy-dependent Accommodation and Private Transportation expenses, seem to be inching down. The tight monetary policy maintained by the Monetary Authority of Singapore seems to have dampened the impact of imported inflation. However, the heightened policy uncertainty and global economic outlook seem to have marginally increased free response median inflation expectations, even after accommodating for behavioural biases in survey-based instruments (Clark, Ghosh and Hanes, 2018).”

“We also observe expected changes in CPI consumption basket, opined by survey respondents, particularly on higher weighted items like Accommodation, Food, Transportation among others (Cavallo, 2020, Kouvavas et. al.,2020, Weber et. al., 2022). Some of these weights might have changed permanently, as work-from-home arrangements have become more standard, compared to the Household Economic Survey findings in 2017-2018 (HES 2017/18). We also observe a slightly higher proportion of respondents (47.3%) feel inflation is declining, and a lower proportion feels inflation is increasing (43.2%), compared to the September 2024 survey, mainly due to tight monetary policy and global slowdown,” Dr Ghosh noted.

For the longer horizon, the Five-year-Ahead CPIEx inflation expectations remained unchanged in December 2024 at 4.5% compared to September 2024, remaining flat since June 2024. The current polled number continues to be slightly higher than the fourth quarter average of 4.1% polled since the survey’s inception in September 2011 up till 2023.

The Five-year-Ahead CPIEx core inflation expectations (excluding costs related to Accommodation and Private Transportation) increased to 4.4% in December 2024 from 4.3% in September 2024. Overall, the composite Five-year-Ahead SInDEx5 also increased slightly to 4.5% in December 2024 from 4.3% in September 2024. In comparison, the fourth quarter average value of the composite Five-year-Ahead SInDEx5 is 3.9%, from the survey’s inception in September 2011 up till 2023.

After adjusting for potential behavioural biases, the free-response Five-year-Ahead Headline Inflation Expectations remained unchanged at 5% in December 2024 compared to September 2024, while the free-response Core Five-year-Ahead Inflation Expectations increased to 5% in December 2024 from 4% in September 2024, possibly signalling heightened uncertainty. However, we observe that long-term headline inflation expectations remained constant despite global uncertainty, signalling movement towards anchoring of long-term inflation expectations.

Dr Aurobindo Ghosh added, “In December 2024, SInDEx survey respondents polled long-term inflation expectations for the Five-year-Ahead Headline have stayed unchanged while the Core Inflation Expectations inched upwards from the September 2024 survey. Even after adjusting for behavioural biases, the long-term headline inflation expectations remained flat for the third quarter in a row after declining over the previous four quarters. This reflects some element of anchoring of longer-term inflation expectations, and therefore corroborates academic findings of the importance and accuracy of survey-based measures (Ang, Baekert and Wei, 2007).”

Methodology

DBS-SKBI SInDEx survey yields CPIEx Inflation Expectations (estimating headline inflation expectations) and related indices are products of the online quarterly survey of around 500 randomly selected individuals representing a cross section of Singaporean households. The survey is led by Principal Investigator Dr Aurobindo Ghosh, Assistant Professor of Finance (Education) at Lee Kong Chian School of Business of the SMU. The online survey, powered by Agility Research and Strategy, helps researchers understand the behavior and sentiments of decision makers in Singaporean households. DBS Group Research is a co-sponsor and research partner with the Sim Kee Boon Institute for Financial Economics (SKBI) at SMU.

The quarterly DBS-SKBI SInDEx survey has also yielded two composite indices, SInDEx1 and SInDEx5. SInDEx1 and SInDEx5 measure the One-year inflation expectations and the Five-year inflation expectations, respectively. The sampling was done using a quota sample over gender, age and residency status to ensure representativeness of the sample. Employees in some sectors like journalism and marketing were excluded as that might have an effect on their responses to questions on consumption behavior and expectations.

The DBS-SKBI SInDEx survey was augmented in June 2018, based on a joint research study conducted by SMU researchers in collaboration with MAS and the Behavioural Insights Team, where respondents were polled on their perceptions of components of the Consumers Price Index (CPI) and adjusted for possible behavioural biases prevalent in online surveys.

Based on the recommendations of the joint study, since March 2019 the research team has polled the One-year-Ahead inflation expectations of all of the major components of CPI-All Items inflation. For December 2024 survey, DBS-SKBI CPIEx headline inflation expectations indices remained unchanged from September 2024. The core inflation expectations however inched down across different measures. The behaviourally adjusted component-wise and recombined inflation expectations increased slightly signaling some heightened uncertainty. In free-response answers, compared to September 2024 survey, responses in the December 2024 survey polled for One-year-Ahead Headline remained unchanged while Core Inflation Expectations increased. Overall, the results indicate continued slowdown in the medium term and flattening of long inflation expectations.

We introduced a new ratio in the June 2020 survey, on the life versus livelihood debate as an aftermath of the Covid-19 pandemic – the ratio of respondents who feels livelihood should be prioritised over life vis-à-vis those who feel the other way. This ratio declined to 2.4 in December 2024 compared to 4 in September 2024. For every respondent who prioritised life over livelihood, there were about 2.4 who prioritised livelihood over life, signalling life returning to normal with an endemic Covid-19 in Singapore and focused on economic growth.

^{Figure 2: Five-year-Ahead-Inflation Expectations in Singapore: The chart shows the quarterly DBS-SKBI CPIEx (CPI-All Item), DBS-SKBI CPIEx Core (excluding Accommodation and Private Road Transportation components), SInDEx (Composite index with lower weights on volatile components like Food, Energy, Accommodation and Private Transportation) One-year and Five-year-Ahead Inflation Expectations polled online quarterly for the Singapore Index of Inflation Expectations (SInDEx) Survey conducted from 16 December 2024 to 23 December 2024. The chart shows a preliminary estimate of Behaviourally Adjusted One-year-Ahead overall DBS-SKBI Adjusted CPIEx. As comparison benchmarks, the chart provides the most recent quarterly CPI-All Items Inflation, MAS Survey of Professional Forecasters median One-year-Ahead CPI-All Items inflation forecasts and the yield spread of 10-year and 1-year Singapore Savings Bonds (SSB). Source: SKBI, SMU, MAS-MTI, Department of Statistics}

References:

Ang, A., G. Bekaert, and M. Wei., 2007, “Do Macro Variables, Asset Markets, or Surveys Forecast Inflation Better?” Journal of Monetary Economics, 54:4, pp. 1163–212.

Cavallo, A., 2020, "Inflation with COVID Consumption Baskets." NBER Working Paper Series, No. 27352, June 2020 (Harvard Business School Working Paper, No. 20-124, May 2020). (https://www.hbs.edu/faculty/Pages/item.aspx?num=58253, accessed on July 14, 2020)

Clark, A., A. Ghosh and S. Hanes, 2018, “Inflation Expectations In Singapore: A Behavioural Approach,” Macroeconomic Review, Vol 17:1, pp. 89-98.

Household Expenditure Survey (HES 2017/18): (https://www.singstat.gov.sg/publications/households/household-expenditure-survey, accessed on July 10, 2024)

Kouvavas, O., R. Trezzi, M. Eiglsperger, B. Goldhammer and E. Goncalves, 2020, “Consumption patterns and inflation measurement issues during the COVID-19 pandemic,” ECB Economic Bulletin, Issue 7/2020. (https://www.ecb.europa.eu/pub/economic-bulletin/html/eb202007.en.html#toc6, accessed on July 14, 2020)

MAS Monetary Policy Statement- October 2024, (https://www.mas.gov.sg/news/monetary-policy-statements/2024/mas-monetary-policy-statement-14oct24, accessed on Oct 17 2024)

MAS Survey of Professional Forecasters (MAS SPF), December 2024, (https://www.mas.gov.sg/-/media/mas-media-library/monetary-policy/mas-survey-of-professional-forecasters/2024/survey-writeup-dec-2024-web.pdf, accessed on Jan 16, 2025)

Singapore Consumer Price Index Press Release (DOS CPI), December 2024, Singapore Department of Statistics (https://www.singstat.gov.sg/-/media/files/news/cpinov24.ashx, accessed on January 16, 2024)

Weber, M., F. D’Acunto, Y. Gorodnichenko and O. Coibion, 2022, “The Subjective Inflation Expectations of Households and Firms: Measurement, Determinants, and Implications,” Journal of Economic Perspectives, 36:3, pp. 157–184.