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Singapore's inflation hits 2.7% in May

Inflation rose 2.7 per cent in May on the back of higher transport costs, such as fluctuations in COE premiums, according to figures by the Department of Statistics on Monday (June 23).

SINGAPORE: The Consumer Price Index (CPI) rose 2.7 per cent in May from a year ago, the highest since March 2013, according to figures released by the Department of Statistics on Monday (June 23).

Inflation last month picked up pace from April, when the CPI rose 2.5 per cent on-year following a rise of 1.2 per cent in March.

The Monetary Authority of Singapore (MAS) attributed the rise to base effects associated with the fluctuations in Certificate of Entitlement (COE) premiums.

Private road transport cost climbed by 8.1 per cent in May, stronger than the 5.7 per cent rise in the preceding month, mainly on account of the low base in May 2013. Petrol pump prices also edged up at a faster pace than in April.

COE premiums were at a low in May 2013 after loan caps were imposed on car buyers.

Premiums for the certificates, which are needed for car ownership, gradually rose as the market adjusted to borrowing restrictions, bumping up the CPI a year on.

"For the whole of last year, inflation in Singapore...actually quite low, mainly due to the car inflation being at the low level. What that means is that...due to the low base (last year), we are likely to see higher inflation coming from cars (this year), and it's not going to be a once-off thing," said UOB economist Francis Tan.

Authorities, however, expect car prices to add negligibly to inflation with the dissipation of the base effect.

Accommodation cost rose by 0.9 per cent compared with 1.1 per cent in April, due to a slower pace of increase in imputed rentals on owner-occupied accommodation, MAS said.

MAS Core Inflation, which excludes the cost of accommodation and private road transport, fell to 2.2 per cent in May from 2.3 per cent in April, due to lower contributions from services and food items.

Prices of retail items like clothing and footwear declined in May. This can be attributed to the start of the Great Singapore Sale.

Authorities say domestic cost pressures, particularly stemming from a tight labour market, are likely to remain the primary source of inflation.

They expect core inflation to stay elevated at 2 to 3 per cent in 2014, with headline inflation projected to ease.

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