By Romesh Navaratnarajah:Despite the fluctuation in property and stock prices, Singaporeans aren't changing how they spend, according to a recent macroeconomic report by the Monetary Authority of Singapore (MAS).
It noted that the 'wealth effect' is not seen in Singapore, as people here do not usually go on shopping sprees just because home and stock prices rise. Neither do they cut back significantly on expenses on the back of a downturn.
Such a trend is a contradiction to the US, UK and Australia, where consumer spending is affected by the rise and fall of their assets' value.
Irvin Seah, an economist at DBS, said that Singapore emulates a conservative spending culture. "Singaporeans are more prudent with their finances. We have a saving culture. High inflation is also eroding the wealth effect."
On the contrary, consumers in other countries like the US and UK tend to use credit cards or bank loans for short-term spending, noted Sundaram Janakiramanan, Finance Programme Head at SIM University.
MAS noted that the study aims to find out whether the active property market and growing interest in stocks have pushed people to spend more. It used data on per capita private spending, real GDP per capita, retail sales, the private property price index, money supply and the Straits Times Index (STI).
MAS added that there is 'little evidence' that consumer spending in the short term will be considerably affected by property or stock prices.
"The findings…should be taken as tentative since a more complete analysis of wealth effects requires appropriate controls for socioeconomic characteristics, and agents' expectations that may affect both expenditure and wealth," it said. Related Stories:Singapore's inflation up 5.2% in March
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