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Consumer prices in Singapore fall for 15th straight month in January

Consumer prices declined 0.6 per cent in January, the 15th straight month of decline. Core inflation, which excludes accommodation and private road transport, edged up to 0.4 per cent from 0.3 per cent in December.  

SINGAPORE: Inflation in Singapore fell 0.6 per cent year-on-year in January, according to a joint news release from the Ministry of Trade and Industry (MTI) and the Monetary Authority of Singapore (MAS) on Tuesday (Feb 23).

This is the 15th straight month that consumer prices have fallen.

Private road transport cost fell by 1.8 per cent in January, compared to the 1.1 per cent decline in December. This was due to the sharper fall in car prices after weaker Certificate of Entitlement (COE) premiums more than offset the faster pace of increase in petrol pump prices.

Accommodation cost dropped by 3.1 per cent in January, extending slightly the 3 per cent drop last December, and this was attributed to the soft housing rental market.

Overall services inflation moderated to 0.5 per cent in January, down from 0.9 per cent in December, largely due to a slower pace of increase in education services fees and holiday travel costs, said MAS and MTI.

Healthcare services costs grew though, as the disinflationary effects of enhanced medication subsidies introduced in January last year dissipated, the agencies added.

Since January 2015, lower- to middle-income Singaporeans have been able to receive enhanced medication subsidies at subsidised Specialist Outpatient Clinics and polyclinics. Singaporeans who qualify for the Pioneer Generation Package are entitled to an additional 50 per cent off the remaining cost of the subsidised medications.

Meanwhile, food inflation increased 1.7 per cent last month compared to the 1.5 per cent growth in December, as the larger increase in the prices of non-cooked food more than offset the smaller rise in the cost of prepared meals.

For the whole of 2015, CPI-All Items inflation fell by 0.5 per cent, down from 1 per cent in 2014. This is the first decline since 2002, according to Department of Statistics data released on Monday.

The CPI excluding imputed rentals on owner-occupied accommodation edged up by 0.1 per cent in 2015, lower than the 1.2 per cent increase in 2014.

Core inflation, which excludes the cost of accommodation and private road transport, came in at 0.4 per cent, compared to 0.3 per cent in December. This was mostly on account of the smaller reduction in electricity tariffs and higher food and retail goods inflation, which more than offset the fall in services inflation, MAS and MTI said.


MAS and MTI reiterated that external sources of inflation are "likely to remain muted", due to ample supply buffers in major commodity markets and weak global demand conditions.

"Notably, global oil prices have fallen by around one-third since mid-October, and are expected to remain low in 2016," said MAS and MTI. "Wages are expected to continue to increase in 2016, although at a more moderate pace compared to last year. The pass through of wage costs to consumer prices may also remain tempered by the subdued economic growth environment."

Given the significant step-down in global oil prices in recent months and the larger-than-expected decline in COE premiums at the start of the year, the forecast for CPI-All Items inflation in 2016 has been revised down to -1.0 to 0 per cent from -0.5 to 0.5 per cent.

The forecast for MAS Core Inflation is unchanged at 0.5 to 1.5 per cent, reflecting the smaller weight of oil-related items and the exclusion of private road transport costs.

MAS Core Inflation is still expected to pick up gradually over the course of 2016, as the disinflationary effects of oil as well as budgetary and other one-off measures ease. 

Ms Selena Ling, head of treasury research and strategy at OCBC Bank, said: "You'll see more buoyant pricing pressures in core inflation mainly because you still have a tight labour market. There will be some pass through from the tight labour market into consumer prices, although the pass through is not going to be as strong as what was anticipated in the past.

"On top of that, if you look at what's driving core inflation, food inflation looks like it's going to be one segment of the market where we're going to see some pricing pressures. (Furthermore), education and healthcare are also a reflection of the tight labour market in these sectors as well." 


Looking ahead, economists said prices could start to pick up towards the second half of the year, citing favourable base effects. But overall, they said it is likely to be a year of benign inflation amid the sluggish growth environment.

"The main factor supporting the pick-up in core inflation has been the lower base. The base in January was lower than the base of the last few months, and that's a function of the reduction in electricity tariffs that took place in January. We can expect a further lowering of that base from April onwards, which means there's a better chance that core shows us a higher number on a year-on-year basis," said Barclays' senior regional economist, Leong Wai Ho.  

"I think again, the pick-up will be more gradual than we thought because it's quite likely that with low oil prices persisting, the transmission into electricity prices, which is lagged, will come through in the later quarters of this year. So although it's up, although it's positive, it's a smaller number than what we thought," he added.