REPORT ON THE RESULTS OF THE INFLATION EXPECTATIONS SURVEY. August 2018

Transcription

1 REPORT ON THE RESULTS OF THE INFLATION EXPECTATIONS SURVEY August 18 Belgrade, September 18

2 C O N T E N T S Introductory note... Overview... 4 Inflation expectations of the financial sector... 5 Inflation expectations of the corporate sector... 6 Inflation expectations of trade unions... 7 Inflation expectations of the household sector... 7 Quantitative inflation expectations... 7 Qualitative inflation expectations... 8

3 Introductory note Indicators of inflation expectations of economic agents are an important factor in the process of monetary policy decision-making in an inflation targeting regime. The effectiveness of the inflation targeting strategy is measured by the degree of stability of inflation expectations and by how firmly they are anchored within the target tolerance band. Stable and well-anchored inflation expectations contribute to greater credibility of the monetary policy framework. Consistent with best international practice, after introducing the inflation targeting regime in January 9, the NBS began monitoring and analysing inflation expectations of economic agents, drawing on the inflation expectations survey, conducted for the NBS by Ipsos agency since January 18. Survey respondents are classified into four sectors (the financial sector, corporate sector, trade unions and households) and asked to state their one-year ahead price growth expectations, and since March 14, also their medium-term, i.e. two-year ahead, expectations for y-o-y price growth.

4 Overview According to the results of the August survey conducted by Ipsos, short-term and medium-term inflation expectations of all sectors, except households, are within the NBS's target band (±1.5%). Compared to the previous month, one-year ahead inflation expectations in August were lower in the financial sector (.9%), corporates (.5%) and households (6.%), while the expectations of trade unions edged up slightly to.5%. Also, medium-term inflation expectations of all sectors, except households, are within the target band. The drop in inflation expectations was recorded in trade unions (to.75%), corporates (.6%) and financial sector (.%), while household inflation expectations remained unchanged at 5.%. Firmly anchored inflation expectations are one of the prerequisites for achieving low, stable and predictable inflation. The fact that inflation expectations in Serbia are well anchored confirms the credibility of the NBS measures and indicates the absence of major inflationary and disinflationary pressures. 4

5 Inflation expectations of the financial sector According to the results of both surveys (August Ipsos and September Bloomberg surveys), short-term inflation expectations continued to move close to the target midpoint and equalled.9%. The composite measure of one-year ahead inflation expectations of the financial sector 1 (comprising the results of the Ipsos and Bloomberg surveys) came at.8% in August (.9% in July). Chart 1 Composite measure of inflation expectations of the financial sector (%) , Source: NBS, Ipsos, and Bloomberg. Medium-term inflation expectations of the financial sector (two-year ahead) have been within the target tolerance band since this question was introduced in the survey questionnaire (March 14) and stood at the.% target in August (.% in July). 1 Weighted by the individual respondent s share in total assets of the surveyed financial institutions. Institutions participating in both surveys are assigned the arithmetic mean of the responses provided in the Ipsos and Bloomberg surveys. Hence, banks with a larger market share have a greater influence on the aggregate result. 5

6 Inflation expectations of the corporate sector Short-term inflation expectations of corporates recorded a fall in August, to.5% (.7% in July), and medium-term to.6% (.8% in July). Corporates raised their expectations for GDP growth in the current year from.5% in July to.8% in the August survey. As in the preceding months, in August the majority of corporates anticipated that the prices of their products would remain stable in the period ahead. However, the net percentage (NP) of corporates expecting that the prices of their products would rise in the following three months posted a rise, to 5.7%, which is the highest level this year. As for the anticipated prices of their products in the upcoming 1 months, the NP of corporates expecting their rise edged up slightly to 6.6% (58.7% in July). The NP of corporates expecting a rise in input prices over the next three months equalled 1.% (18.% in July), and the NP of those expecting a rise over the next year to 6.6% (.% in July). Chart Expectations of the corporate sector regarding movements in the prices of inputs and final products in the next three months 1 (NP) Input prices Final product prices - months *Above zero indicates growth, and below zero decline. Source: Ipsos/Ninamedia. Calculated as the difference between the share of enterprises expecting the prices to increase and enterprises expecting the prices to decrease, weighted by operating income. 6

7 The NP of corporates expecting an increase in production/trade over the next three months went up to 9.9% (7.% in July). The NP of respondents expecting an increase in the coming year also went up from 41.9% in July to 45.% in the August survey. Inflation expectations of trade unions According to Ipsos survey results, short-term inflation expectations of trade unions edged up slightly to.5% (.5% in July), while medium-term inflation expectations, following a temporary exit in July, returned within the target band and equalled.75% in August. The trade unions expect wages will rise over the next twelve months. Inflation expectations of the household sector Quantitative inflation expectations One-year ahead inflation expectations of households have been moving between 5.% and 7.% for almost three years now. According to August Ipsos survey results, short-term inflation expectations of households fell to 6.%, while medium-term inflation expectations remained unchanged at 5.%. Chart Expected y-o-y inflation one and two years ahead (%) , 6, 5, 5, 5, 4,,,9,,7,8,5,6,5,5,75 1 Financial sector Enterprises Unions Households One y ear ahead July surv ey Two y ears ahead July surv ey One y ear ahead August surv ey Two y ears ahead August surv ey Source: Ipsos. 7

8 Qualitative inflation expectations As in previous months, descriptive (qualitative) expectations are in line with quantitative inflation expectations. In August, the majority of respondents (7.1%) expect prices to rise moderately or slightly over the next twelve months. The share of respondents anticipating prices to increase considerably in the coming twelve months declined significantly from 17.1% in July to 1.8% in August. Such trends, i.e. the majority of respondents expecting prices to increase moderately and somewhat over the next twelve months reflect a predictable and stable economic environment, which facilitates the achievement of the main medium-term goal of the monetary policy. Chart 4 Distribution of household responses by perceived and expected inflation (%) , 6, 5, 5, 5, 4,,,9,,7,8,5,6,5,5,75 1 Financial sector Enterprises Unions Households One y ear ahead July surv ey Two y ears ahead July surv ey One y ear ahead August surv ey Two y ears ahead August surv ey Source: Ipsos. The perceived inflation index was higher than the expected inflation index, which indicates that households expect inflation in the coming twelve months to be lower than in the previous year. Such trend stems from the fact that one part of the population, who felt that prices increased in the past twelve months, did not expect the trend to continue over the next twelve months. The index represents the difference between the weighted share of respondents who assess that prices increased more than somewhat and those assessing that prices remained unchanged or decreased. For details, see Text box of the Inflation Report February 16. 8

9 Chart 5 Perceived and expected inflation of households (in index poimts) Perceived Inflation Expected Inflation Source: Ipsos. 9