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Singapore, 24 April 2012 - Singapore households
expect inflation to fall in the next one to five years. The
third survey on inflation expectations Index released by MasterCard
and Singapore Management
University (SMU) shows that Singapore's inflation
expectations dropped in the first quarter of 2012. This may
be attributed to more informed consumers and improved
optimism towards the global economy.
The SKBI-MasterCard Singapore Index of Inflation
Expectations (SInDEx) was
launched in January 2012. It was developed by Dr
Aurobindo Ghosh and Professor Jun Yu from SMU Sim Kee Boon
Institute for Financial Economics (SKBI), in collaboration
with MasterCard. SInDEx is derived from an online survey
designed to help researchers understand the behaviour and
sentiments of decision makers in Singapore.
This third SInDEx survey follows
two earlier surveys conducted in September and December
last year. The third online survey was conducted in
March 2012 and it gathered feedback from around 400
individuals from Singapore households. Consumers were asked
a variety of demographic and socioeconomic questions. The
consumers also shared their views on perceived values of
economic variables over the next one to five years.
The March 2012 quarterly survey showed for the current
year, the SInDEx1, a composite medium term inflation
expectations index which measures inflation expectations
over the next one year, was at its lowest at 4.2% since its
inception. The Headline inflation expectations (which
measures overall inflation expectations for the coming one
year) was at 4.13 %, a drop from the 4.7% recorded last
December. The March figure is also the lowest since the
index was first created in September 2011. The medium term
Singapore Core inflation expectations (excluding
accommodation and private transportation) also reached a
new low of 4.2 % in March.
As for the next five years, SKBI-MasterCard Singapore Index
of Inflation Expectations (SInDEx5, the composite weighted
five-year inflation expectations) also fell from 5.16% to
4.97%. The five-year Headline inflation expectations (which
measures overall inflation expectations five years from
now) dropped slightly from 5.3% in December to 5.2%. The
five-year Singapore Core inflation expectations (excluding
accommodation and private transportation) also dropped from
5.09% to 4.8%.
The researchers opined that the slow but steady decline in
the annualised inflation expectations five years from now
is a reflection of more effective "anchoring" of inflation
expectations due to better communication between policy
makers, media and the general public, since the SInDEx was
launched in January this year.
Some of the factors which might explain the difference
between the higher Headline inflation and the lower Core
inflation expectations, are the current sentiments arising
from higher COE prices and property prices. After the newly
instituted cooling measures late last year, Headline
inflation expectations arising out of property price has
probably come down.
Dr. Aurobindo Ghosh, co-creater of SInDEx and Programme
Director at SMU SKBI said "A well anchored long term
inflation expectations measure is not expected to fluctuate
frequently with short term movements like the upward price
pressure coming from commodities like global oil prices or
short term market sentiments."
"Academic research has also indicated that there might be a
slight upward bias in the inflation expectations globally
due to consumers' personal experience. As an example, a
recent publication from the Conference Board Consumer
Research Center showed that even the US inflation
expectations for March 2012 was at 6.3%, up from 5.5% in
February. This is the highest level reached since May 2011
probably due to higher global oil prices although the US
economy is looking more upbeat.
"Given the downward trend in the Singapore Inflation
Expectations Index, albeit nascent, we are cautiously
optimistic that the public's perception on inflation
expectations is a good reflection of a more positive IMF
World Economic Outlook (WEO, April 2012)," Dr. Ghosh added.
Dr.
Yuwa Hedrick-Wong, global economic advisor, MasterCard
Worldwide, said, "Cautious optimism is the catch cry of
2012 as economies continue to slowly recover from the
financial crisis. In this connection, a moderation in the
reading of inflation expectations for Singapore supports
the case for optimism. Everything else being equal, a
continuation of this trend could gradually lead to a more
competitive exchange rate of the Singapore dollar, hence
Singapore exports. This will in turn support a stronger
economic performance of Singapore in a global economy that
is still facing serious challenges and weighed down by
uncertainty."
Methodology
Two indices were created, SInDEx1 and SInDEx5, to measure
the 1-year inflation expectations and the 5-year inflation
expectations. The data for the SKBI-MasterCard Survey was
collected online from about 400 consumers. 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, marketing were
excluded as that might have an effect on their responses to
questions on consumption behaviour and expectations.
About MasterCard Worldwide
MasterCard
(NYSE: MA), www.mastercard.com, is a
global payments and technology company. It operates the
world's fastest payments processing network, connecting
consumers, financial institutions, merchants, governments
and businesses in more than 210 countries and territories.
MasterCard's products and solutions make everyday commerce
activities - such as shopping, traveling, running a
business and managing finances - easier, more secure and
more efficient for everyone. Follow us on Twitter , join
the conversation on The Heart of
Commerce Blog and subscribe.
About Singapore Management University
A premier university in Asia, the Singapore Management
University (SMU) is internationally recognised for its
world class research and distinguished teaching.
Established in 2000, SMU's mission is to generate leading
edge research with global impact and produce broad-based,
creative and entrepreneurial leaders for the
knowledge-based economy. It is known to be a pioneer
for its interactive and technologically-enabled pedagogy of
seminar-style teaching in small class sizes which remains
its unique hallmark.
Home to more than 7,200 students, SMU comprises six
schools: School of Accountancy, Lee Kong Chian School of
Business, School of Economics, School of Information
Systems, School of Law and School of Social Sciences,
offering a wide range of bachelor's, master's and PhD
degree programmes in business and other disciplines.
With an emphasis on generating rigorous, high impact
cross-disciplinary research that addresses Asian issues of
global relevance, SMU faculty collaborates with leading
foreign researchers as well as partners in the business
community and public sector through its research institutes
and centres. Through executive education, the
university provides public and customised training for
working professionals in meeting the needs of the
economy. Close relationships with leading
universities, including The Wharton School, Carnegie
Mellon, the University of Pennsylvania and the University
of Chicago's Booth School of Business, allow SMU to draw on
their academic and research strengths in various
collaborations. The SMU city campus is a state-of-the
art facility located in the heart of downtown Singapore,
fostering strategic linkages with the business and wider
community. www.smu.edu.sg
About Sim Kee Boon Institute for Financial Economics
Established in July 2008, the Sim Kee Boon Institute for
Financial Economics (SKBI) at the Singapore Management
University promotes the study of Financial Economics and
Financial Econometrics in areas of strategic relevance to
Singapore's economy and the economies of the region. A
significant addition to Singapore's efforts to be a
financial hub in Asia, SKBI is a leading institute for
academic research with strong industry application and
practical dimension in the area of Financial Economics.
The Institute has four major research centres for
quantitative financial analysis and offers training
programmes for professionals in the financial industry. Its
work is conducted in close collaboration with leading
scholars in financial economics and financial econometrics
from around the world as well as leading international
organisations and experts from industry. www.smu.edu.
Media contacts:
Kong Hwee Ting, SMU +65 6808 5238, htkong@smu.edu.sg
Gladys Ng, SKBI, SMU + 65 6808 5229, gladysng@smu.edu.sg
Georgette Tan, MasterCard Worldwide, +65 6390 5971, georgette_tan@mastercard.com
Rob O'Brien, Weber Shandwick, +65 6825 8064, robrien@webershandwick.com
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