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

Transcription

1 REPORT ON THE RESULTS OF THE INFLATION EXPECTATIONS SURVEY July 218 Belgrade, August 218

2 C O N T E N T S Introductory note... 3 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

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 29, 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 218. 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 214, also their medium-term, i.e. two-year ahead, expectations for y-o-y price growth. 3

4 Overview In July, inflation expectations of the financial and corporate sectors kept moving within the NBS target tolerance band (3±1.5%). According to the results of the Ipsos survey, one-year ahead inflation expectations of the financial and corporate sectors and trade unions continued to move within the target tolerance band (3±1.5%) and in July stood at the target 3% (financial sector), 2.7% (corporates) and 3.2% (trade unions). Inflation expectations of households stayed at 5.%. Medium-term inflation expectations of the corporate and financial sectors continued to move around the target midpoint (2.8% and 3.2% respectively), while expectations of households and trade unions stood 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 Ipsos survey, one-year ahead inflation expectations of the financial sector remained at the 3.% target in July. According to the Bloomberg August survey, short-term inflation expectations of the financial sector came close to the target and measured 2.9% (2.8% in July). 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 2.9% in July (2.85% in June). 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 214) and stood at 3.2% in July (3.% in June). 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 For the third consecutive month, short- and medium-term inflation expectations of corporates were 2.7% and 2.8% respectively. Corporates raised their expectations for GDP growth in the coming year from 3.% in June to 3.5% in the July survey. In July, as in previous months, the majority of corporates (93.1%) anticipated that the prices of their products would not change in the next three months. The net percentage 2 (NP) of corporates expecting that the prices of their products would rise in the following three months posted a significant drop, from 21.1% in June to 6.5% in July, which is the lowest level this year. As for the anticipated rise in the prices of their products in the upcoming 12 months, the NP of corporates edged up slightly to 58.7% (57.7% in June). The NP of corporates expecting an increase in the prices of inputs in the next three months equalled 18.% in July, almost unchanged from the June survey (17.7%), while in terms of the anticipated rise in these prices in the next 12 months their percentage edged up to 3.3% (28.9% in June). Chart 2 Expectations of the corporate sector regarding movements in the prices of inputs and final products in the next three months (NP) Input prices Final product prices - 3 months *Above zero indicates growth, and below zero decline. Source: Ipsos/Ninamedia. 2 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 anticipating an increase in production/trade over the next three months was 27.2% (2.7% in June), while the NP of those expecting a rise over the next 12 months increased to 41.9% (42.2% in June). Inflation expectations of trade unions According to the Ipsos survey results, short-term inflation expectations of trade unions rose to 3.25% (3.% in June), while medium-term inflation expectations equalled 5.% (3.% in June). Inflation expectations of the household sector Quantitative inflation expectations The Ipsos July survey indicated that the short-term expectations of households stood at 7.%, while medium-term expectations have remained unchanged at 5.% since May 217 (with the exception of January 218, when medium-term expectations were 6.%). Chart 3 Expected y-o-y inflation one and two years ahead (%) Financial sector Enterprises Unions Households One year ahead June survey Two years ahead June survey One year ahead July survey Two years ahead July survey Source: Ipsos. 7

8 Qualitative inflation expectations In July, as in previous months, descriptive (qualitative) expectations of households were in line with quantitative inflation expectations, indicating that the majority of respondents (66.5%) expect prices to rise moderately or slightly in the next twelve months. The share of respondents anticipating prices to increase considerably in the coming twelve months was 17.1% in July, almost unchanged from June (17.2%). At the same time, there was a rise in the share of respondents anticipating no change in prices to 1.4% (8.1% in June), as well as in the share of those who do not expect a decline to 1.6% (.3% in June). 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 (%) Increase considerably Increase moderately Increase somewhat Last 12 months June survey Next 12 months June survey Remain Decrease Don t know unchanged Last 12 months July survey Next 12 months July survey 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. 3 3 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 2 of the Inflation Report February

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