SINGAPORE, 20 January 2020 (Monday) - These are the research findings of the 34th round of quarterly release for the DBS-SKBI Singapore Index of Inflation Expectations (SInDEx) Survey at the Sim Kee Boon Institute for Financial Economics (SKBI), Singapore Management University (SMU).

  • One-year-Ahead headline inflation expectations remained unchanged at 3.2% in December 2019, from September 2019, and largely the same as the 2011-18 fourth quarter average of 3.3%.
  • The overall CPIEx Inflation Expectations, after adjusting for potential behavioral biases and re-combining across components, eased to 3% in December 2019 compared to 3.3% in September 2019.
  • Excluding accommodation and private road transportation related costs, the One-year-Ahead Core CPIEx inflation expectations was slightly higher at 3.4% in December 2019 compared to 3.3% in September 2019.
  • For a subgroup of the population who own their accommodation and use public transport, the One-year-Ahead CPIEx core inflation expectations pared to 3% in December 2019 from 3.2% in September 2019. Not being exposed to private road transportation or accommodation expenses, this subgroup’s expectations of core inflation closely resemble the Singapore Core Inflation Expectations.
  • The one-year-ahead composite index SInDEx1, that puts less weight on more volatile components like accommodation, private transport, food and energy, polled at 3.2% remained unchanged in the December 2019 SInDEx survey.

DBS Chief Economist and Managing Director of Group Research, Dr. Taimur Baig commented, “Unlike recent developments in China and India, where idiosyncratic factors have pushed up food prices, along with the overall CPI, prices have been remarkably stable in Singapore lately. Despite an impending GST hike, inflation expectations remain well anchored.”

“The stability of Singapore’s inflation expectations also contrasts with a similar survey conducted by the Melbourne Institute which showed consumer inflation expectations in Australia rising in Q4, coincident with the bushfires that have only intensified recently,” noted SMU Professor and SKBI Director Dave Fernandez.

SMU Assistant Professor of Finance and Principal Investigator of the DBS-SKBI SInDEx Project, Aurobindo Ghosh observed, “The global economy is facing significant headwinds from the sluggish growth in China and India, which is affecting global consumer confidence, despite the US economy showing significant resilience. Against this backdrop, Singaporeans seem to have calibrated their inflation expectations to hold steady in the medium term despite accommodative monetary policy at home and abroad.”

For the longer horizon, the Five-year-Ahead CPIEx inflation expectations in the December 2019 survey stayed unchanged at 4.1% compared to September 2019. The current polled number is the same as the 2011–2018 fourth quarter average of 4.1%.

The Five-year-Ahead CPIEx core inflation expectations (excluding accommodation and private road transportation related costs) fell from 3.9% in September 2019 to 3.6% in December 2019. Overall, the composite Five-year-Ahead SInDEx5 inched down to 3.8% in December 2019 from 4% in September 2019. In comparison, the 2011–2018 fourth quarter average value of the composite Five-year-Ahead SInDEx5 was at 4%.

“While designing the DBS-SKBI SInDEx survey questionnaire, SMU researchers have included several methods of validating and mitigating possible behavioural biases which academic researchers have identified as challenges to survey-based measures of inflation expectations. It has also been conjectured by policy academics and practitioners that while the overall level of inflation expectations using survey-based measures might be biased upwards, the change points and comparisons with past surveys signals the changes in inflation expectations better,” Prof. Ghosh added.


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