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Inflation Expectations Survey of Households: June 2015

The Inflation Expectations Survey of Households for June 2015 (40thround) captures the inflation expectations of 4,994 urban households across 16 cities, for the next three-month period and the next one-year period. These expectations are based on their individual consumption baskets and hence these rates should not be considered as benchmark of official measure of inflation. The households’ inflation expectations provide useful directional information on near-term inflationary pressures and also supplement other economic indicators.

Highlights:

I. In terms of qualitative response, the proportion of respondents expecting prices to rise by ‘more than current rate’ has increased as compared to the previous round of survey for both three-month and one-year ahead period for most of the product groups except Housing prices. However, majority of the respondents continues to expect similar or lower rate of price change or expects the prices to remain unchanged or even fall. The overall sentiment is mainly driven by expectations for prices of food products and cost of services (Table 2).

II. A similar pattern is witnessed in terms of quantitative responses. Current perceived inflation as well as expected inflation for next-three month and next one-year ahead period increased marginally in June 2015 round (Chart1).

III. The survey shows that other employees (other than those from financial sector), housewives and retired persons have comparatively higher inflation expectations for three-month ahead period based on median inflation rates. Respondents from Guwahati, Jaipur, Ahmedabad, and Bhopal cities expect relatively higher inflation for next three months.

Table 1: Respondents’ Profile (Category): Share in Total Sample
Category of Respondents Share in Total (%) Target Share (%)
Financial Sector Employees 9.9 10.0
Other Employees 15.8 15.0
Self-employed 19.3 20.0
Housewives 29.7 30.0
Retired Persons 9.9 10.0
Daily Workers 10.0 10.0
Others 5.4 5.0
Note: The above sample proportion is for the round ended June 2015 survey.

Table 2: Product-wise Expectations of Prices for Three-month ahead and One-year ahead
(Percentage of respondents)
Round No./survey period 36 37 38 39 40 36 37 38 39 40
(Round ended) → Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Jun- 14 Sep-14 Dec-14 Mar-15 Jun-15
Options: General Three-month ahead One-year ahead
Prices will increase 77.5 86.4 72.4 73.6 81.0 83.6 90.0 79.8 82.2 90.9
Price increase more than current rate 41.2 43.9 25.7 28.3 34.4 47.4 48.0 32.1 32.9 41.7
Price increase similar to current rate 21.5 28.8 27.0 24.0 24.3 22.0 27.4 29.9 28.8 28.8
Price increase less than current rate 14.8 13.7 19.8 21.2 22.3 14.2 14.6 17.8 20.6 20.4
No change in prices 12.7 9.0 16.5 15.4 13.9 7.4 5.5 11.2 10.0 5.8
Decline in price 9.8 4.6 11.0 11.1 5.2 9.0 4.5 9.0 7.8 3.3
Options: Food Product Three-month ahead One-year ahead
Prices will increase 77.2 85.9 72.3 74.4 83.1 82.8 89.5 79.9 82.4 91.9
Price increase more than current rate 42.3 41.9 25.2 27.9 35.1 47.0 46.2 30.7 32.0 39.1
Price increase similar to current rate 21.5 28.1 28.5 25.2 25.7 21.3 27.7 30.5 29.2 30.5
Price increase less than current rate 13.4 15.8 18.5 21.3 22.3 14.5 15.5 18.7 21.1 22.3
No change in prices 13.9 9.0 17.1 15.0 11.7 7.9 5.8 11.3 9.9 5.2
Decline in price 8.9 5.1 10.6 10.6 5.3 9.3 4.7 8.9 7.7 3.0
Options: Non-Food Product Three-month ahead One-year ahead
Prices will increase 73.1 78.5 65.1 64.2 76.0 79.5 83.8 75.1 76.0 85.6
Price increase more than current rate 37.3 34.7 21.2 21.7 27.7 42 36.3 26.1 25.8 31.7
Price increase similar to current rate 21.7 27.2 26.1 24.0 26.3 22.3 29.0 30.6 28.4 30.3
Price increase less than current rate 14.1 16.5 17.8 18.5 21.9 15.3 18.4 18.4 21.7 23.6
No change in prices 18.9 17.4 25.6 24.6 20.6 12.7 12.1 16.6 16.3 11.2
Decline in price 8.0 4.2 9.3 11.2 3.4 7.8 4.1 8.3 7.7 3.1
Options: Household Durables Three-month ahead One-year ahead
Prices will increase 68.9 64.0 59.7 68.2 69.1 76.9 76.8 72.1 77.6 82.2
Price increase more than current rate 35.3 27.2 20.4 25.4 25.9 42.1 33.9 27.5 29.2 31.8
Price increase similar to current rate 20.0 22.7 23.8 24.4 24.2 20.7 26.1 27.8 29.2 28.7
Price increase less than current rate 13.6 14.1 15.6 18.4 19.0 14.1 16.9 16.8 19.2 21.7
No change in prices 20.9 24.3 27.3 21.6 23.5 13.9 15.0 16.5 15.5 12.7
Decline in price 10.2 11.7 13.0 10.2 7.4 9.2 8.2 11.4 6.9 5.2
Options: Housing Prices Three-month ahead One-year ahead
Prices will increase 82.2 84.6 78.4 83.2 81.4 87.2 91.5 86.1 90.3 90.1
Price increase more than current rate 55.4 55.5 39.5 46.7 43.1 59.7 60.8 47.9 53.1 50.3
Price increase similar to current rate 17 20.3 24.9 21.5 23.7 17.8 22.5 25.6 23.0 24.3
Price increase less than current rate 9.8 8.8 13.9 14.9 14.5 9.7 8.2 12.6 14.2 15.5
No change in prices 11.1 11.4 13.7 11.8 13.8 6.0 5.0 6.6 5.4 6.5
Decline in price 6.7 4.0 7.9 5.0 4.8 6.8 3.5 7.3 4.4 3.4
Options: Cost of Services Three-month ahead One-year ahead
Prices will increase 78.5 79.1 71.6 78.5 79.9 84.9 87.5 81.8 86.9 89.7
Price increase more than current rate 46.4 38.8 28.4 32.7 34.2 50.6 45.4 34.7 37.6 39.5
Price increase similar to current rate 19.4 25.3 26.6 25.7 26.7 20.7 26.9 30.0 29.5 29.7
Price increase less than current rate 12.6 15.0 16.6 20.0 19.1 13.6 15.2 17.2 19.9 20.5
No change in prices 16.2 18.0 21.7 17.9 18.0 9.3 9.8 11.6 9.7 8.2
Decline in price 5.3 2.9 6.7 3.6 2.1 5.8 2.8 6.6 3.3 2.1

Table 3: Households Expecting General Price Movements in Coherence with Movements in Price Expectations of Various Product Groups: Three-month ahead and One-year ahead
(Percentage of respondents)
Round No. Survey period ended Food Non-Food Households durables Housing Cost of services
Three-month ahead
36 Jun-14 67.8 57.8 54.0 53.1 55.2
37 Sep-14 65.1 53.9 43.9 50.1 51.7
38 Dec-14 62.0 51.9 48.5 48.3 49.5
39 Mar-15 68.8 57.3 43.3 43.1 47.5
40 Jun-15 67.8 51.3 47.2 48.4 52.2
One-year ahead
36 Jun-14 74.0 66.5 64.3 62.1 65.1
37 Sep-14 69.1 59.0 53.3 57.7 59.7
38 Dec-14 66.8 57.8 53.5 53.3 56.6
39 Mar-15 70.5 61.8 51.5 52.0 55.8
40 Jun-15 70.2 62.2 58.5 59.8 62.8

Table 4: Household Inflation Expectations - Current, Three-month ahead 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.
36 Jun-14 12.6 13.3 4.0 12.5 14.0 4.4 13.8 15.0 4.3
37 Sep-14 12.7 13.8 4.0 12.7 14.6 4.4 13.5 16.0 4.0
38 Dec-14 9.0 8.8 4.2 8.8 8.3 4.5 9.3 8.9 4.6
39 Mar-15 9.1 9.0 4.0 9.0 8.5 4.3 9.6 9.1 4.5
40 Jun-15 10.0 9.5 4.1 10.1 10.1 4.5 10.8 10.3 4.4

Table 5: Factors that Explain the Total Variability
Round No. Survey period ended Current Three-month ahead One-year ahead
37 Sep-14 City, Age-Group City, Age-Group City
38 Dec-14 City, Category City, Category City, Category
39 Mar-15 City City City
40 Jun-15 City, Category, Age-Group City, Category, Age-Group City, Category, Gender
Note: Results based on exercise using Analysis of Variance.

Table 6 : Various Group-wise Inflation Expectations for June 2015 Survey Round
  Current Three-month ahead One-year ahead
Mean Median Std. Dev. Mean Median Std. Dev. Mean Median Std. Dev.
Gender-wise
Male 9.9 9.4 4.2 10.0 9.8 4.5 10.5 10.0 4.4
Female 10.1 9.6 4.1 10.3 10.3 4.5 11.1 10.6 4.4
 
Financial Sector Employees 9.1 8.7 4.1 9.3 8.6 4.4 9.7 9.2 4.4
Other Employees 10.3 9.7 4.1 10.4 10.4 4.5 11.0 10.4 4.4
Self Employed 10.1 9.6 4.2 10.1 10.0 4.5 10.7 10.2 4.5
Housewives 10.1 9.6 4.0 10.3 10.3 4.4 11.1 10.5 4.4
Retired Persons 10.4 9.8 4.4 10.3 10.2 4.7 10.8 10.4 4.7
Daily Workers 9.9 9.5 4.0 10.0 10.1 4.4 10.8 10.4 4.3
Other category 9.8 9.3 4.2 9.4 9.0 4.5 10.7 10.2 4.4
 
Up to 25 years 9.6 9.4 3.8 9.8 10.0 4.4 10.6 10.2 4.2
25 to 30 years 9.7 9.3 4.0 9.9 10.0 4.3 10.5 10.0 4.4
30 to 35 years 9.9 9.5 4.0 10.2 10.1 4.5 10.8 10.4 4.4
35 to 40 years 9.8 9.4 4.1 9.8 10.0 4.5 10.7 10.1 4.4
40 to 45 years 10.4 9.8 4.1 10.6 10.5 4.3 11.3 10.8 4.5
45 to 50 years 10.1 9.5 4.1 9.9 9.7 4.5 10.4 10.0 4.7
50 to 55 years 10.5 9.7 4.3 10.3 10.4 4.9 11.0 10.3 4.5
55 to 60 years 10.2 9.7 4.6 9.9 9.5 4.7 10.8 10.2 4.7
60 years and above 11.0 10.2 4.3 10.8 10.6 4.6 11.2 10.8 4.6
 
Ahmadabad 11.3 11.9 5.1 11.2 12.3 5.4 12.4 13.8 4.3
Bangalore 7.1 5.6 3.8 7.7 6.8 3.5 8.0 7.5 4.0
Bhopal 10.9 10.2 3.0 12.2 12.0 3.0 12.3 11.7 3.4
Bhubaneswar 10.7 9.7 3.5 11.6 11.6 3.7 12.7 14.0 3.7
Chennai 11.3 10.3 4.2 11.2 10.6 4.6 12.1 13.6 4.5
Delhi 6.8 6.5 2.2 5.9 5.6 3.2 6.5 6.0 2.6
Guwahati 12.3 11.5 3.8 12.3 12.7 4.1 12.5 12.3 3.9
Hyderabad 10.4 10.3 3.5 11.4 11.5 3.8 12.5 14.3 4.0
Jaipur 11.1 9.9 3.5 12.5 12.7 3.6 12.1 11.9 3.8
Kolhapur 9.5 8.3 4.1 10.9 10.6 4.2 11.4 11.1 4.2
Kolkata 12.4 11.8 4.1 11.3 11.5 4.7 12.0 13.2 4.7
Lucknow 11.8 10.8 3.7 11.5 11.5 4.6 12.7 13.9 3.9
Mumbai 8.4 8.0 3.4 8.7 7.9 4.0 9.1 8.9 4.1
Nagpur 8.0 6.5 3.6 8.3 7.5 4.0 8.1 7.3 4.0
Patna 8.2 8.2 2.1 9.0 8.9 2.4 10.1 10.3 2.4
Thiruvananthapuram 11.4 10.8 4.3 9.2 9.7 4.4 11.3 11.5 4.6
All 10.0 9.5 4.1 10.1 10.1 4.5 10.8 10.3 4.4

Table 7: Cross-tabulation of Current and Three-month Ahead Inflation Expectations
(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 3 2 3 1 2 1 1 0 0 0 0 0 0 0 0 0 0 3 16
1-2 3 9 6 2 2 0 1 1 1 0 0 0 0 0 0 0 0 2 27
2-3 1 9 16 23 9 3 2 1 1 0 0 0 0 0 0 0 0 0 65
3-4 1 11 14 19 27 10 2 0 0 0 0 0 0 0 0 0 0 1 85
4-5 3 12 9 80 71 58 70 8 4 2 2 8 1 0 0 0 0 11 339
5-6 5 10 14 20 29 100 95 65 29 3 11 5 2 0 1 0 0 6 395
6-7 3 10 15 34 35 44 72 90 37 12 21 11 2 0 1 0 9 2 398
7-8 7 8 11 8 33 39 39 101 58 4 46 15 3 1 3 1 8 3 388
8-9 4 8 5 6 2 4 1 43 109 10 84 27 8 3 2 0 7 4 327
9-10 3 6 5 6 10 11 41 52 92 90 195 96 75 21 76 13 38 23 853
10-11 2 4 9 5 4 28 5 6 28 37 155 58 71 20 53 38 33 7 563
11-12 3 1 0 2 1 0 0 3 2 13 12 33 16 24 29 8 9 2 158
12-13 0 0 2 0 0 1 0 1 1 3 2 7 8 10 16 12 1 0 64
13-14 0 0 1 0 0 0 0 0 0 1 1 1 1 8 4 10 4 1 32
14-15 0 0 0 5 10 8 2 5 0 13 11 9 12 9 42 31 84 5 246
15-16 0 0 0 4 6 5 5 2 3 3 11 0 1 2 14 47 77 12 192
>=16 0 0 0 6 7 11 11 12 10 41 32 12 13 12 16 22 616 25 846
Total 38 90 110 221 248 323 347 390 375 232 583 282 213 110 257 182 886 107 4994

Table 8: Cross-tabulation of Current and One-year Ahead Inflation Expectations
(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 5 0 2 0 1 1 1 1 1 1 1 0 0 0 0 0 0 2 16
1-2 4 4 4 4 2 0 2 0 0 2 0 0 0 0 0 0 0 5 27
2-3 0 12 13 5 7 5 4 2 2 2 0 0 0 1 0 0 0 12 65
3-4 4 0 26 23 9 6 4 5 1 1 1 0 0 1 0 0 0 4 85
4-5 2 3 3 103 82 24 16 18 16 28 10 2 1 0 6 1 3 21 339
5-6 3 1 5 5 101 130 21 25 24 37 29 1 2 1 1 2 2 5 395
6-7 0 0 9 3 7 117 125 21 31 36 20 8 3 1 4 1 6 6 398
7-8 0 0 0 4 7 2 47 147 27 44 50 9 15 4 8 6 9 9 388
8-9 9 2 3 9 13 6 5 13 98 24 62 25 18 6 6 9 10 9 327
9-10 2 1 1 1 15 5 3 8 174 259 46 37 29 27 89 32 88 36 853
10-11 1 1 0 0 5 2 12 7 5 51 194 56 39 19 34 58 67 12 563
11-12 0 1 0 1 4 0 3 11 0 1 16 52 17 9 12 14 17 0 158
12-13 0 0 0 0 0 0 1 1 0 4 0 8 19 1 5 11 10 4 64
13-14 0 0 0 0 0 0 0 1 0 0 1 0 1 9 4 2 9 5 32
14-15 0 1 1 2 6 0 1 1 0 12 5 2 2 34 62 22 75 20 246
15-16 0 0 1 0 0 0 1 1 0 0 3 1 1 1 15 66 90 12 192
>=16 4 0 1 0 2 2 0 7 5 16 5 2 2 0 14 11 715 60 846
Total 34 26 69 160 261 300 246 269 384 518 443 203 149 114 260 235 1101 222 4994

1 The previous round of the survey data was published on April 7, 2015 on RBI website. The survey results are based on views of the respondents which are not necessarily shared by the Reserve Bank of India.

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