CONSUMPTION BEHAVIOUR IN SINGAPORE : ANALYSIS OF SINGAPORE'S PCE FUNCTION

Abstract

Singapore has grown to become a robust newly industralised economy today. It has a consumer market of 3.74 million people. It strives to be a regional hub. Our strategic position and abundant business opportunities available preserve our global importance in the ever-changing world economy. These are a few reasons to motivate a consumer study on Singapore. Furthermore, there are limited studies done on consumption behaviour. Since early 1990s, there have been no further studies, with the most recent studies done by Govindasamy (1991) and Lee (1986).

As Singapore progresses from a newly independent country in 1960s to the modern cosmopolitan city of today, the standard of living has substantially improved. This transformation and development of Singapore economy has resulted in a great change in the composition of household expenditure. There is a perceptible shift in both the quantity and quality of our goods and services. Changes in educational opportunities, household size and occupational structure are some factors that caused this change.

This academic exercise aims to analyse the change in the composition of consumption expenditure. It also examines the macroeconomic variables influencing consumption and the impact of such variables on consumption patterns.

The major finding is that there is an increase in expenditure on luxury goods and fall in expenditure on necessities. Food has become more income inelastic. Growing consumer affluence has increased the propensity of Singaporeans to travel abroad. On aggregate consumption, disposable income, lagged consumption one period, GST rates and CPF contributions are factors that influence the consumption patterns in Singapore.