Inflation expectations ease

11th September 2023 By: Marleny Arnoldi - Deputy Editor Online

The Bureau for Economic Research (BER) cites in its latest Inflation Expectations Survey that respondents including analysts, business people and trade unions are expecting the average headline consumer price inflation to drop for the first time in two years.

Expectations of inflation have declined significantly in the third quarter of the year compared with the second quarter.

Lower expectations were also evident over the entire forecast horizon from 2023 to 2025, with business people and trade unions having made downward revisions by 0.6 percentage points each for all three years.

Analysts, however, virtually retained their forecast for the second quarter.

These revisions were done against the backdrop of headline inflation having dropped from 6.3% in May to 4.7% in July.

The average five-year inflation expectations continue to tick down, reaching 5.1% in the third quarter from a peak of 5.6% in the second quarter of 2022.

The one-year-ahead inflation expectations of households subsided from a recent peak of 8.1% in the second quarter, to 7% in the third quarter.

The five-year expectations declined from 10.7% to 9.8%.

During the third quarter of 2023, the survey respondents, on average, forecasted economic growth to be 0.8% this year, before rising to 1.4% in 2024.

This forecast is slightly more optimistic for this year, though similar for next year, compared with the second quarter.

On average, the three social groups expect salaries and wages to increase by 5% this year and to then gain momentum to 5.4% in 2024.

Previously, they expected 5% for both years.

The BER will release the results of the next survey on December 14.