Channel NewsAsia

Consumer prices extend fall in February led by lower fuel, utilities cost

Singapore’s consumer prices fell 0.8 per cent last month, with steep declines in the cost of fuel and utilities and private road transport. 

SINGAPORE: Consumer prices in Singapore declined 0.8 per cent in February, led by steep drops in the cost of fuel and utilities as well as private road transport and accommodation, according to data released on Wednesday (Mar 23).

The fall was the 16th straight month of decline, and came after a 0.6 per cent fall in January.

The cost of fuel and utilities fell sharply by 10.6 per cent in February. The cost of private road transport fell by 3.9 per cent, due to a larger fall in car prices amid weaker Certificate of Entitlement (COE) premiums and a slower pace of increase in petrol pump prices, the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said in a joint statement.

The cost of accommodation also declined by 3.2 per cent, following the 3.1 per cent decline in the previous month, as the housing rental market continued to soften, MAS and MTI said.

Overall services inflation was 0.5 per cent in February, unchanged from a month earlier. While domestic services cost saw a stronger pickup, this was offset by a more moderate increase in holiday expenses.

Food inflation rose to 2 per cent in February from 1.7 per cent in January, driven by a larger increase in the prices of prepared meals, including restaurant, hawker and fast food.

Core inflation, which excludes the cost of accommodation and private road transport, came in at 0.5 per cent, compared to 0.4 per cent in January. This was mostly due to the higher food inflation, MAS and MTI said.

MAS UNLIKELY TO EASE POLICY: ECONOMIST

Looking ahead, one economist said MAS is unlikely to ease policy, despite the continued fall in inflation. This means that MAS will let the Singapore dollar appreciate against the currencies of Singapore's trading partners.

Said Mr Ho Woei Chen, an economist at UOB: "The MAS has actually eased the slope of the Sing dollar NEER (nominal effective exchange rate) in the two previous meetings in 2015. So we don't think that the MAS would move again in April because this would essentially mean that they are moving toward a neutral stance.

"And given the current economic conditions, even though the growth rate is slower, we don't think that we are in a recessionary environment as yet. So we don't think the MAS will move to a neutral stance at this point with core inflation still in the positive territory."

For the whole of 2016, MAS expects headline inflation to average between -1 per cent and zero, while core inflation is expected to come in between 0.5 and 1.5 per cent.