SINGAPORE, 21 January 2021 - These are the research findings of the 38th 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).
DBS Chief Economist and Managing Director of Group Research, Dr. Taimur Baig commented, “Inflation expectations in Singapore appear to be responding to global cues, with sentiments improving and yet not particularly strong. With the depth of the pandemic hopefully behind and supportive policies still in place, some pick up in food, energy, manufactured goods, and services prices can be expected. Accordingly, we see a welcome revival in inflation expectations, although they are by no means high.”.
Commenting on the results of the 38th round of the DBS-SKBI survey, SKBI Director Professor David Fernandez said, ”The sharp drop in inflation expectations, now followed by this stabilisation at low levels, is consistent with our view that policymakers won't want to withdraw Covid-induced support any time soon. It will be worth tracking, going forward, the pace at which inflation expectations recover.”
SMU Assistant Professor of Finance and founding Principal Investigator of the DBS-SKBI SInDEx Project, Aurobindo Ghosh observed, “The world exhaled a collective sigh of relief with the availability of the Covid-19 vaccine from Pfizer-BioNTech in November 2020, this was followed by other vaccines made available, leading to a belief that an end to the pandemic could be in sight. Prospects of global recovery have been renewed as a result of better global growth and trade prospects with the signing of the Brexit deal, change of regime in the US and the Regional Comprehensive Economic Partnership (RCEP) treaty. In addition, fewer respondents feel the impact of the pandemic will be longer term or have a significant impact. We also find less perceived distortion in consumption baskets and prices due to the pandemic, although there are expectations of higher inflation in some components like healthcare, clothing & footwear and communications.”
For the longer horizon, the Five-year-Ahead CPIEx inflation expectations in the December 2020 survey edged up to 3.2% from 3% in September 2020. The current polled number is significantly lower than the fourth quarter average of 4% since the survey’s inception in 2012 till 2019.
The Five-year-Ahead CPIEx core inflation expectations (excluding accommodation and private road transportation related costs) also increased to 3.1% in December 2020 compared to 2.9% in September 2020. Overall, the composite Five-year-Ahead SInDEx5 also increased to 3.1% in December 2020 from 2.9% in September 2020. In comparison, the fourth quarter average value of the composite Five-year-Ahead SInDEx5 was 3.8 % since the survey’s inception in 2012 till 2019.
“Moderate increase in long term inflation expectations bode well from three perspectives. First, the general uptick in Singaporeans’ inflation expectations was based on global cues that included strong commitment to the recovery by central banks which had signaled accommodative policies, both monetary and fiscal, for the immediate and foreseeable future. Second, long term inflation expectations seem more “anchored” in terms of global economic realities despite abundance of liquidity in the market. Finally, as a measure of the tradeoff between prioritizing economic growth compared to the cost to health, the ratio remained unchanged at 3 from September 2020 to December 2020. This means that for every 1 person who wanted to prioritize life over livelihood, there were 3 who prioritized livelihood over life, up from 2 in the June 2020 survey. These observations signal a higher public appetite of normalisation of economic activities that governments are paying heed to globally,” Professor Ghosh observed.
Be alerted on SKBI news and forthcoming events.
*Please note that upon providing your consent to receive marketing communications from SMU SKBI, you may withdraw your consent, at any point in time, by sending your request to skbi_enquiries [at] smu.edu.sg (subject: Withdrawal%20consent%20to%20receive%20marketing%20communications%20from%20SMU) . Upon receipt of your withdrawal request, you will cease receiving any marketing communications from SMU SKBI, within 30 (thirty) days of such a request.