Households’ inflation expectations crashed to all-time low in December

Blame it on the oil rout and bleak global outlook.

Singaporean households’ inflation expectations crashed to an all-time low in December, the Singapore Index of Inflation Expectations (SInDEx) by Singapore Management University (SMU) revealed today.

The SInDEx moderated to 3.53% from 3.73% in September, the lowest value of the headline inflation expectations since the survey’s inception in September 2011.

The One-year-Ahead Singapore core inflation expectations excluding accommodation and private transportation related costs also dropped to 3.61% in December from 3.95% in September . This represents the biggest drop since the survey’s inception..

The decline can be blamed on the precipitous drop in global oil prices, the bleak global outlook and the expectation of higher benchmark interest rates.

Lower imported inflation, driven by oil prices near six-year low, seems to have substantive downward impact on reducing the perceptions of future inflation expectations.

Despite the presence of significant domestic pass-through costs in a tight labour market and expected stimulus spending in the Eurozone and Japan, weakness in global demand seems to have brought both the overall inflation expectations and the Singapore core inflation expectations to their lowest levels since 2011.

“Compared to the historical headline inflation expectations average of 4.11% and the historical fourth quarter average of 4.08%, the current One-year-Ahead headline inflation expectations shows that Singapore households are cognisant of the global conditions and responding to price experiences and official communications and release of aggregated data from policymakers,” the report stated.