<strong>By: Bureau for Economic Research</strong>

In the first quarter of 2019, inflation expectations for both 2019 and 2020 declined across all social groups relative to the previous quarter. The average for 2019 declined from 5.4% to 4.8% and for 2020 from 5.4% to 5.2%. Inflation is expected to edge up marginally to 5.3% in 2021. Of all the social groups, business people made the biggest downward adjustment in their expectations, namely from 5.7% to 5.1% in respect of 2019 and from 5.8% to 5.3% for 2020. Trade unions scaled their forecasts for 2019 and 2020 back by 0.5 and 0.3 percentage points (% pts) and analysts by 0.5 and 0.1% pts respectively.

Inflation expectations are currently also low from a long-term perspective. After being stuck at about 6% between 2012 and 2016, average expectations started drifting lower since 2017 to reach 4.8% in the first quarter of 2019.

Five-year inflation expectations declined further to a new record low since 2011, the first time they were surveyed.

The first quarter of 2019 household inflation expectations results will provisionally be made public by mid April.

In the first quarter of 2019, the survey respondents on average lowered their forecast of economic growth during 2019 from 1.4% to 1.1%. Regarding next year, the respondents expect economic growth to improve slightly by 0.4% pts to reach 1.5%.

On the rand/US dollar exchange rate, there was no significant change in average expectations. Overall, the respondents expect the rand to trade at R14.26 per dollar by the end of this year and at R14.33 by the end of next year.

The survey respondents made a significant downward revision to their outlook on salary and wage increases. They now expect wages to rise by only 5.4% this year (and 5.7% next year). This rate is 1.2% pts lower than the 6.6% they anticipated during the previous survey.