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Households’ Inflation Expectations Rise in June 2016

Households’ inflation expectations for the next three-month as well as for the next one-year period have risen. This was indicated in the inflation expectations survey conducted by the Reserve Bank of India in June 2016 (44th round). This survey is conducted by RBI at regular intervals and it provides useful directional information on near-term inflationary pressures and supplements other economic indicators. These expectations are formed by individuals based on their consumption basket and should not be treated as benchmark for official measure of inflation. The June 2016 round of survey was conducted across 18 cities among 5360 urban households from various categories (Table 1).

Highlights:

I. The proportion of respondents expecting general prices to rise by ‘more than current rate’ in the next three-month and one-year period has increased in June 2016 round compared to March 2016 round (Table 2). Similar sentiments prevailed across the selected product groups also.

II. Three-month ahead median inflation rate increased sharply from 8.1 per cent to 9.2 per cent and one year ahead median inflation rate moved marginally from 9.4 per cent to 9.6 per cent between March 2016 and June 2016 rounds (Table 4 and Chart-1).

III. Median inflation expectations rose across most of the categories, age-groups and cities.



Table 1: Respondents’ Profile (Category): Share in Total Sample
Category of Respondents Share in Total (%) Target Share (%)
Financial Sector Employees 10.0 10.0
Other Employees 15.2 15.0
Self-employed 19.9 20.0
Housewives 29.2 30.0
Retired Persons 10.1 10.0
Daily Workers 9.8 10.0
Others 5.8 5.0
Note: The above sample proportion is for June 2016 round

Table 2: Product-wise Expectations of Prices for Three-Month and One-Year Ahead
(Percentage of respondents)
Round No./survey period 40 41 42 43 44 40 41 42 43 44
(Round ended) → Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16
Options: General Three-Month Ahead One-Year Ahead
Prices will increase 81.9 82.8 86.7 79.7 85.2 91.0 90.6 90.9 89.5 90.4
Price increase more than current rate 34.5 36.3 35.7 31.4 37.7 41.2 43.6 41.6 37.4 44.8
Price increase similar to current rate 25.3 21.2 29.5 26.4 28.7 29.3 23.8 28.5 31.6 27.6
Price increase less than current rate 22.1 25.4 21.5 21.9 18.8 20.6 23.2 20.9 20.6 18.0
No change in prices 13.4 12.3 9.0 16.6 11.4 5.8 5.5 5.6 7.5 6.3
Decline in price 4.7 4.8 4.3 3.7 3.4 3.1 3.9 3.5 2.9 3.4
Options: Food Product Three-Month Ahead One-Year Ahead
Prices will increase 84.1 84.1 85.9 81.1 86.5 92.3 89.6 90.6 88.3 90.1
Price increase more than current rate 35.2 37.5 34.9 30.3 38.3 39.5 42.8 41.2 34.7 44.7
Price increase similar to current rate 26.8 23.2 30.1 29.0 29.3 31.0 24.2 29.2 32.8 28.4
Price increase less than current rate 22.1 23.3 20.9 21.8 18.9 21.8 22.6 20.2 20.9 17.1
No change in prices 11.1 10.4 8.8 14.3 9.1 5.0 6.1 5.6 8.5 5.5
Decline in price 4.8 5.5 5.3 4.6 4.4 2.7 4.3 3.9 3.2 4.3
Options: Non-Food Product Three-Month Ahead One-Year Ahead
Prices will increase 76.8 73.5 74.3 70.8 72.7 86.2 82.8 81.9 81.4 82.5
Price increase more than current rate 27.7 26.8 23.7 23.4 27.7 32.1 32.1 29.2 26.6 33.6
Price increase similar to current rate 27.2 23.2 29.1 26.6 26.3 30.7 24.4 29.6 32.1 29.2
Price increase less than current rate 21.8 23.5 21.5 20.8 18.6 23.5 26.3 23.1 22.7 19.7
No change in prices 20.0 21.4 20.8 24.6 23.0 10.9 12.8 13.8 14.9 13.8
Decline in price 3.2 5.2 5.0 4.6 4.4 2.9 4.4 4.3 3.7 3.7
Options: Household Durables Three-Month Ahead One-Year Ahead
Prices will increase 70.1 65.7 68.6 70.9 66.6 83.0 78.4 78.9 80.0 79.9
Price increase more than current rate 26.0 24.6 22.1 22.5 26.3 32.4 32.0 29.2 28.7 34.1
Price increase similar to current rate 24.9 19.1 26.3 27.0 23.4 28.9 22.8 29.4 30.2 27.3
Price increase less than current rate 19.2 22.1 20.2 21.4 16.9 21.7 23.6 20.3 21.1 18.6
No change in prices 22.9 25.0 22.5 20.5 25.7 12.2 14.7 14.0 13.7 14.2
Decline in price 7.1 9.2 8.8 8.6 7.8 4.9 7.0 7.2 6.3 5.9
Options: Housing Prices Three-Month Ahead One-Year Ahead
Prices will increase 81.3 79.8 80.2 78.3 77.3 90.2 89.4 88.4 86.0 86.6
Price increase more than current rate 42.8 42.2 39.9 40.7 43.8 50.1 52.4 48.7 47.8 52.2
Price increase similar to current rate 23.9 20.3 25.1 22.7 20.6 24.5 19.2 24.9 24.2 21.8
Price increase less than current rate 14.7 17.4 15.3 15.0 12.9 15.5 17.9 14.8 14.0 12.5
No change in prices 14.0 14.2 13.3 14.8 16.2 6.5 6.2 6.9 8.1 8.5
Decline in price 4.7 6.0 6.5 6.8 6.6 3.4 4.3 4.7 6.0 4.9
Options: Cost of Services Three-Month Ahead One-Year Ahead
Prices will increase 80.5 74.2 81.6 76.1 78.4 89.8 87.0 90.4 87.0 88.8
Price increase more than current rate 33.5 31.5 35.9 29.6 33.7 39.1 40.3 42.0 37.4 42.8
Price increase similar to current rate 27.6 20.5 27.2 26.8 26.9 30.2 22.1 28.6 29.5 28.5
Price increase less than current rate 19.5 22.2 18.5 19.7 17.9 20.6 24.6 19.9 20.1 17.5
No change in prices 17.6 22.4 15.4 20.2 19.0 8.2 9.8 7.0 10.0 8.5
Decline in price 1.9 3.5 3.0 3.7 2.6 2.0 3.3 2.6 3.1 2.8

Table 3: Households Expecting General Price Movements in Coherence with Movements in Price Expectations of Various Product Groups: Three-Month and One-Year Ahead
(Percentage of respondents)
Round No. Survey period ended Food Non-Food Households durables Housing Cost of services
Three-months Ahead
40 Jun-15 68.7 52.3 48.5 49.3 52.8
41 Sep-15 70.0 58.1 50.6 54.0 56.1
42 Dec-15 73.2 59.4 51.4 54.4 60.9
43 Mar-16 69.6 63.2 59.1 58.7 64.6
44 Jun-16 69.8 60.0 54.5 55.7 59.2
One-year Ahead
40 Jun-15 71.0 63.3 59.4 59.6 62.9
41 Sep-15 70.3 59.5 55.4 60.8 60.6
42 Dec-15 77.8 63.9 60.2 61.6 67.2
43 Mar-16 73.1 67.4 66.6 63.9 69.2
44 Jun-16 74.7 64.5 60.6 61.5 65.9

Table 4: Household Inflation Expectations – Current, Three-Month and One-Year Ahead
Survey Round Survey period Ended Inflation rate in Per cent
Current Three-month Ahead One-year Ahead
Mean Median Std. Dev. Mean Median Std. Dev. Mean Median Std. Dev.
40 Jun-15 9.9 9.5 4.0 10.1 10.0 4.4 10.7 10.2 4.4
41 Sep-15 10.4 9.8 4.3 10.6 10.4 4.3 11.2 11.1 4.5
42 Dec-15 10.5 9.9 4.2 10.5 9.9 4.1 10.7 10.0 4.3
43 Mar-16 8.9 7.9 4.4 8.8 8.1 4.6 9.7 9.4 4.6
44 Jun-16 8.8 8.0 4.4 9.7 9.2 4.4 10.0 9.6 4.7

Table 5: Factors that Explain the Total Variability
Round No. Survey period ended Current Three-month Ahead One-year Ahead
40 Jun-15 City, Category City, Category, Age-Group City, Category
41 Sep-15 City, Age-Group, Gender City, Age-Group, Gender City, Age-Group, Gender
42 Dec-15 City, Age-Group City, Age-Group City, Age-Group
43 Mar-16 City, Age-Group City City, Category
44 Jun-16 City, Age-Group, Category City, Category City, Category

Table 6 : Various Group-wise Inflation Expectations for June 2016 Survey Round
  Current Three-month Ahead One-year Ahead
Mean Median Std. Dev. Mean Median Std. Dev. Mean Median Std. Dev.
Gender-wise
Male 8.9 8.1 4.3 9.7 9.3 4.4 10.0 9.6 4.6
Female 8.6 7.7 4.5 9.6 9.1 4.5 9.9 9.5 4.8
Category-wise
Financial Sector Employees 8.4 7.7 4.1 9.2 8.7 4.1 9.5 9.1 4.4
Other Employees 8.8 8.2 4.3 9.8 9.5 4.5 10.1 9.7 4.6
Self Employed 9.1 8.6 4.4 9.8 9.4 4.5 10.1 9.8 4.7
Housewives 8.6 7.7 4.4 9.6 9.1 4.5 10.0 9.5 4.7
Retired Persons 9.3 8.1 4.6 10.1 9.6 4.6 10.4 9.8 4.6
Daily Workers 8.7 7.9 4.5 9.8 9.2 4.5 10.0 9.5 4.8
Other category 8.2 7.4 4.3 9.1 8.4 4.3 9.2 8.9 4.5
Age Group-wise
Up to 25 years 8.1 7.4 4.0 9.2 8.8 4.1 9.5 9.3 4.5
25 to 30 years 8.3 7.4 4.2 9.2 8.5 4.3 9.7 9.4 4.6
30 to 35 years 8.7 8.1 4.2 9.5 9.1 4.5 9.9 9.6 4.6
35 to 40 years 8.8 8.0 4.5 9.8 9.3 4.6 10.1 9.5 4.9
40 to 45 years 9.0 8.4 4.4 9.8 9.4 4.4 10.0 9.6 4.6
45 to 50 years 9.3 8.8 4.6 9.9 9.6 4.4 10.0 9.7 4.9
50 to 55 years 9.5 9.1 4.7 10.3 9.8 4.6 10.6 9.9 4.7
55 to 60 years 9.2 8.2 4.7 9.9 9.6 4.6 10.3 9.9 4.7
60 years and above 9.9 9.2 4.6 10.5 10.2 4.6 10.7 10.1 4.7
City-wise
Ahmadabad 13.4 16.0 4.1 13.7 16.2 4.4 14.1 16.2 3.9
Bengaluru 5.0 5.1 2.8 5.7 5.2 3.3 5.1 4.4 3.5
Bhopal 6.8 5.8 3.2 8.8 8.0 3.6 9.0 8.3 4.5
Bhubaneswar 9.1 9.1 3.9 11.0 11.0 3.9 11.5 11.9 4.5
Chennai 8.6 7.7 3.9 10.8 10.1 4.1 10.0 9.5 4.7
Delhi 6.5 5.8 2.4 8.2 7.6 2.8 7.4 6.5 3.4
Guwahati 14.0 16.2 4.5 14.0 16.2 4.7 13.9 16.2 4.5
Hyderabad 7.1 6.5 2.8 6.9 6.5 2.9 9.0 8.7 2.8
Jaipur 9.1 9.4 3.3 10.9 10.9 3.5 11.8 12.6 4.2
Kolkata 11.7 10.6 4.2 11.9 12.6 4.8 12.5 14.3 4.4
Lucknow 8.3 7.8 4.1 7.6 6.5 4.7 8.7 9.0 4.1
Mumbai 7.8 7.1 3.5 8.9 8.1 3.6 8.3 7.7 3.7
Nagpur 4.3 3.6 3.1 5.4 4.7 3.2 6.0 5.3 3.4
Patna 9.0 8.7 1.5 10.1 10.0 1.5 10.9 10.8 2.0
Thiruvananthapuram 11.5 12.7 4.9 10.0 10.3 5.2 11.3 12.1 5.0
Chandigarh 12.3 13.3 4.1 12.4 14.1 4.6 14.2 16.0 3.5
Ranchi 7.9 8.1 2.4 9.0 9.4 2.5 10.0 10.3 3.2
Raipur 5.9 5.0 3.0 7.2 6.8 3.3 7.1 5.8 4.1
All 8.8 8.0 4.4 9.7 9.2 4.4 10.0 9.6 4.7

Table 7: Cross-tabulation of Current and Three-month Ahead Inflation Expectations: June 2016
(Number of respondents)
  Three-month ahead inflation rate (per cent)
Current inflation rate (per cent)   <1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 10-11 11-12 12-13 13-14 14-15 15-16 >=16 No idea Total
<1 17 16 9 2     1                     4 49
1-2 9 18 47 11 6 2 2                     1 96
2-3 2 10 21 42 42 12   2 1                   132
3-4   4 9 26 63 57 19 8 2   1             2 191
4-5 4 10 26 25 77 106 151 69 18 22 7 1 3   5 2   11 537
5-6 3 3 9 17 24 135 276 231 76 34 23 3 1   2 2 1 15 855
6-7 4 5 6 7 4 11 62 117 105 44 18 7 1 1 2 1 2 12 409
7-8 4 2 2 12 3 5 6 49 128 129 53 12 9 3 2 3 2 4 428
8-9   3 5 6 6 6 8 4 32 141 105 28 9 9 3 8 3 4 380
9-10 3 19 15 10 16 16 2 11 5 57 118 116 57 16 61 12 23 6 563
10-11 1 3 6 3 7 12   6 3 6 45 96 91 47 27 79 35 11 478
11-12         1         1 2 6 20 24 15 6 11   86
12-13             1       2 1 6 18 18 14 5   65
13-14           1         2   2 4 11 2 5   27
14-15   2   1 2 1   1   6 2   2 1 22 23 64 3 130
15-16 1 2 1   2 2 1   1 6 7 1 2 1 5 50 78 4 164
>=16 4 7 10 4 12 6 4 2 1 24 22 4 3 4 6 20 610 27 770
Total 52 104 166 166 265 372 533 500 372 470 407 275 206 128 179 222 839 104 5360

Table 8: Cross-tabulation of Current and One-year Ahead Inflation Expectations: - Jun 2016
(Number of respondents)
  One-year ahead inflation rate (per cent)
Current inflation rate (per cent)   <1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 10-11 11-12 12-13 13-14 14-15 15-16 >=16 No idea Total
<1 11 13 5 5 2 2                       11 49
1-2 14 37 12 16 6 5 1 1   2               2 96
2-3 1 20 37 13 16 18 13 4 5 1 1 1 2           132
3-4 1 4 27 65 25 28 13 9 6 6 2   2 1     1 1 191
4-5   4 11 95 203 37 34 34 24 44 10 10 6   1 6 10 8 537
5-6 2 2 11 10 198 278 43 88 62 62 51 12 5 2 7 8 2 12 855
6-7 1 1 4 3 4 56 111 36 41 45 33 16 15 7 8 12 4 12 409
7-8   6 2 1 3 4 42 125 32 58 48 20 15 14 24 20 10 4 428
8-9   2 4 2 3 4 6 35 95 16 68 35 18 14 27 29 10 12 380
9-10 1 2 2 2 6 4 5 1 57 175 29 73 34 17 44 33 71 7 563
10-11 1   1 1 1 10 2 1 4 64 116 25 36 22 20 81 74 19 478
11-12           1       1 18 18 3 9 10 8 18   86
12-13               1   1 1 13 16 2 13 6 8 4 65
13-14                 1     1 3 8 1 6 7   27
14-15         1 1       2 1 1 2 13 40 17 49 3 130
15-16   1 1   2 1     3 1 8 1 2 1 20 42 74 7 164
>=16 7   2   2 1 2 1 1 12 10 2 3 2 5 16 652 52 770
Total 39 92 119 213 472 450 272 336 331 490 396 228 162 112 220 284 990 154 5360

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