Tug-of-war: Inflation vs Consumer – who wins?
- 200 respondents to a survey we conducted shows consumers are well aware of surging inflation with 8 in 10 expecting it to last for the next 12 months or longer
- Reopening to boost retail sales, but we are watchful on a shift in spending patterns as inflation bites
- Staples are defensive bets in the face of spending pattern changes, though travel and leisure spending may continue on pent-up demand
- Picks: SSG, KIMLY, SIA, FCT, LREIT, CICT, CDREIT, ART
How will high CPI affect consumers’ spending? The recent Singapore Consumer Price Index (CPI) in Mar and Apr were the highest since 2008. We wondered how consumers will perceive this. We conducted a quick consumer survey, garnering 200 responses, to get an early understanding of the interplay between Singapore consumers and inflation, their perception, and impact on their spending categories. This is particularly so in the context of easing COVID-19 restrictions in Singapore since 26 April 2022.
Findings. Our survey findings show that consumers are feeling the heat of inflation, with more than 1 in 2 (54% of respondents) perceiving price increases to be above 10% – higher than the level official statistics imply (~5%). 8 in 10 respondents felt that higher inflation is going to last for the next 12 months and beyond, and 64% indicated that their spending habits will shift in the next 6 months in the face of this. Groceries, utilities and dining-out rank among the highest on respondents’ priorities, while shopping, recreation and travel are lowest. Compared with opting for cheaper alternatives and reducing frequency, essential groceries are heavily skewed towards cheaper alternatives, while spending on other groceries (branded food, alcohol, snacks), dining-out and shopping point to a fairly even mix. Interestingly, for highly discretionary spending on travel and recreation, respondents seem to favour quality over quantity, and will opt to reduce frequency rather than look for cheaper alternatives.
Selective picks in Staples and Leisure. Against this backdrop, our stance is a preference towards staple consumer plays – Sheng Siong, Kimly for consumer. We also like SIA for pent-up demand for travel. For retail/ hospitality REITS, we like reopening beneficiaries FCT, LREIT, CICT, CDLHT and ART.