Singaporeans' inflation expectations inch up to 2.7%

On the back of global trade headwind fears.

A survey conducted by Singapore Management University revealed that Singaporeans' one-year-ahead median inflation expectations inched up to 2.7% from its lowest level since September 2011.

According to the institution, this may be attributed to the weakness in global growth, further worsened by unknown foreign policy stance of the incoming US administration.

The results of the December 2016 survey showed that compared to September 2016, the median One-year-Ahead headline inflation (or CPI-All Item inflation) inched up to 2.7% compared to its five-year low of 2.63% recorded in September 2016. As a comparison benchmark, the mean One-year-Ahead headline inflation rate, also moved up to 2.95% in the December 2016 survey compared to its five-year low of 2.82% in the September 2016 survey, continuing its sub 3% value since December 2015.

Meanwhile, the one-year-ahead median Singapore core inflation expectations saw a significant jump to 2.82% from its lowest ever recorded average of 2.47% in September 2016 since the survey’s inception in September 2011. More significantly, for a subgroup of the population who own their accommodation and use public transport, the One-year-Ahead median Singapore core inflation rate for the subgroup increased to 2.65% from its record low of 2.3% polled in September 2016.

"These results indicate that there has been a substantial increase in the perception of future price changes in the Singapore core inflation rate which excludes housing and private road transportation. This might be attributed to both domestic and global price pressures and expected increase in oil and commodity prices," SMU said in a statement.

Commenting on the issue, SMU Assistant Professor of Finance Aurobindo Ghosh said there are two main challenges that are facing the global economy despite unmistakable signs of recovery.

"First, it is policy uncertainty rather than political uncertainty. Even though the markets have recovered somewhat from the fallout of the BREXIT referendum and nearly euphoric rise in consumer confidence levels despite the largely unexpected US presidential election outcome riding largely on corporate tax cut promises, the market exuberance belie the trepidations of the uncertain and largely untested future," he said.

He added, "Second, geopolitically we can see the BREXIT vote and the results of the US presidential election as indicators of a protectionist, populist and possibly anti-trade fervour. Global growth is at a cross roads, 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 for the consumers of a trade dependent economy like Singapore would prepare for possible increase in overall price levels.”