Asian consumers have little confidence that inflation will decline below current local inflation levels in the short and medium term.
In a survey conducted by M&G and YouGov, Hong Kong inflation levels overall are expected climb to 5% in 12 months, and 5.8% in five years. In Singapore, inflation expectations are 4% and 5% respectively.
This compares to current inflation levels of 3.9% in Hong Kong and 1.5% in Singapore.
Consumers in Asia appear to be the most concerned by the impact of rising inflation. Nearly two thirds of consumers in Hong Kong (83%) and Singapore (85%) agree or strongly agree that rising inflation is a concern to them and their families.
However, 63% of Singapore and 75% of Hong Kong consumers expect their net income to increase or remain the same in 12 months.
Consumers in Hong Kong lack confidence in policymakers’ effectiveness
‘There is a strong correlation between inflation rates in Asia because business cycles of many Asian countries tend to be largely driven by export demand. Unlike the US, UK and Europe, Singapore and Hong Kong are characterised by low capacity, a tight labour market and favourable credit conditions,’ said Jim Leaviss, head of retail fixed interest at M&G.
‘The Monetary Authority of Singapore (MAS) and the Hong Kong Monetary Authority (HKMA) will need to be vigilant to ensure that high inflation expectations do not become entrenched and start to become a self-fulfilling prophecy.’
In Singapore, almost half of respondents are “very” or “fairly” confident in the MAS in this respect. In Hong Kong, a large proportion of survey participants do not believe their government is currently following the right economic policies.