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Singapore core inflation falls deeper into negative territory, expected to remain subdued due to COVID-19 outbreak

Singapore core inflation falls deeper into negative territory, expected to remain subdued due to COVID-19 outbreak

A Grab delivery rider wears a face mask as he cycles on a street in Singapore, Mar 31, 2020. (Photo: AFP/Roslan Rahman)

SINGAPORE: Singapore's core inflation fell deeper into negative territory in March, largely due to a steeper decline in the cost of services, according to data published on Thursday (Apr 23).

Inflation is expected to remain subdued going forward, reflecting the impact from the COVID-19 outbreak and lower oil prices, said the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) in a joint press release.

Core inflation, a key policy consideration for MAS, fell to -0.2 per cent on a year‐on‐year basis in March, from ‐0.1 per cent in February.

The gauge, which excludes the price of private transport and accommodation, slipped into deflation for the first time in more than a decade in February.

Similarly, CPI‐All Items inflation dipped to 0 per cent year‐on‐year in March, from 0.3 per cent in the previous month.

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In March, prices for services - including point-to-point transport, telecommunication, healthcare and holiday expense - fell by 0.7 per cent, compared with -0.4 per cent in February. 

Food inflation edged down to 1.5 per cent in March from February's 1.6 per cent, on smaller increases in the prices of restaurant food and non-cooked food. 

The cost of retail and other goods fell at a slower rate of -0.9 per cent in March, compared with -1 per cent in February, on account of smaller price declines for recreational goods and medical products. 

Meanwhile, the pace of decline in the cost of electricity and gas also eased, to -6.2 per cent in March from -7.4 per cent in February, as the Open Electricity Market had a smaller dampening effect on electricity prices due to a slowdown in new take-up rates. 

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"In the quarters ahead, external sources of inflation are likely to remain benign amid weak global demand conditions," said the authorities.

"Oil prices should stay low for an extended period and will weigh on the prices of energy-related components in the CPI basket. 

"At the same time, international measures to contain the COVID-19 outbreak have led to supply chain disruptions, which could put some upward pressure on imported food prices," they added. 

MAS and MTI said prices of outbound travel-related items will decline given the sharp reduction in aviation and tourism activities globally.

Domestically, the implementation of safe distancing measures and weaker labour market conditions will dampen consumer demand, capping price increases for discretionary goods and services. 

Both core and CPI-All Items inflation are forecast to average between -1 per cent and 0 per cent in 2020.

Source: CNA/hs


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