That’s the conclusion of DBS Bank analysts, who dissected data from 1.2 million retail customers — anonymous and aggregated — to understand the impact and implications of soaring price growth in the city-state. Consumers are spending more relative to income, with an expenses-to-income ratio rising to 64% in May from 59% a year earlier.
More troubling, low-income groups are seeing expenses grow 5.6 times faster than their income — providing a window on why policymakers have prioritized relief targeted toward the most vulnerable households. Those subsidies aren’t accounted for in the income component of the ratios DBS computed.
“From a policy standpoint, having a strong Sing dollar definitely will help” to keep imported inflation at bay, Irvin Seah, senior economist at DBS, said in a briefing with reporters. The Monetary Authority of Singapore has tightened monetary policy four times since last year, and fiscal packages have provided relief especially on the lower end.
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But even as policy helps, “it is really down to the responsibility of the individual to manage their finances” and mitigate inflation impact, Seah said.
While 40% of that customer base has seen income growth of less than 5% in the year through May, consumer prices picked up at a faster clip, 5.6%, in the same period.
What’s more, the key drivers of inflation are categories that are top priority for consumers: housing, food, and transport make up about 63% of DBS customers’ budgets. Price growth in expenses runs in the double digits across categories, including 60.2% for transportation and about 57% for a discretionary basket including shopping, entertainment, and travel.
One silver lining in the data: The DBS analysts did see some signs of upward mobility, with 51,588 customers — or about 23% of the base — moving into the next-highest income bracket, S$2500-S$4999 ($1813-$3624), from the lowest group in the past year.