SInDex … ?

Recently, a new inflation index launched by MasterCard and SMU: SKBI-Mastercard Singapore Index of Inflation Expectations. Surveys were taken of a sample population of 400. The survey was conducted in September and December 2011.

The Index is a carefully constructed measure of Singaporean’s core inflation, or at least what is to be expected.
Key results were:

  • SInDex1: Expected Inflation for 1 Year measured at 4.62% (remained the same for Sep % Dec)
  • SInDex5: Expected Inflation over the next 5 years  decreased from 5.2% to 5.16%, Sep and Dec respectively
  • Medium term (1 year) existing economic conditions play a crucial role in determining price expectations. A main contributor is local and global media
  • The long term expectation found that HH are more optimistic, which are affected by citizenship, length of stay and other socio-economic factors.

Serious consideration needs to be taken when using this index to benchmark as an appropriate economic indicator.

  1. Survey design? At this stage there are only 400 people, more surveys need to be taken and over various periods of time
  2. Economic climate situation? How can the index be used when there is no proper comparison to a ‘peaceful economic’ situation? These are some control effects that must be considered.
  3. The results considered show expected inflation that already incorporates adjusted views and ideas of current inflation/economic climate factors. Thus wouldn’t the results just be even more biased and skewed than the original inflation calculation based on the CPI?

Statistically data was presented in this Document.

One significant discovery is that the data was significant accordingly with ‘Awareness of economic Issues’. We cannot over look the important role of media and how it affects ever single aspect of our lives. Awareness of economic issues will be directly correlated with the media and what is or isn’t release. This will affect HH decisions for inter temporal choices, which will of course affect investors and government decision makers. Media is converging to be a forecasting tool for economics and it is a matter of time (or maybe it is already out there) where social media is used and incorporated into financial models.

Just imagine, your status update to buy or sell something can and will affect inflation.

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