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Singapore's core inflation declines further, falls to -0.4% in July

Singapore's core inflation declines further, falls to -0.4% in July

The Singapore city skyline as seen from Jubilee Bridge (Photo: Jeremy Long)

SINGAPORE: Singapore's core inflation fell to -0.4 per cent year-on-year in July, the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said in a joint news release on Monday (Aug 24).

The latest figure compares with the -0.2 per cent recorded in June. A Reuters poll estimated a 0.3 per cent fall in the core consumer price index.

Core inflation – a key policy consideration for MAS – excludes the price of private transport and accommodation.

Headline or overall inflation, which includes all items, also came in at -0.4 per cent year-on-year in July, ticking up a tad from -0.5 per cent in the previous month.

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The drop in core inflation in July was mainly driven by a steeper decline in the cost of electricity and gas, as well as lower food inflation, said MAS and MTI.

Meanwhile a smaller drop in the cost of private transport, which came in at -2.1 per cent in July compared to -4.4 per cent in June, contributed to the gentler year-on-year slide for overall inflation.

This came on the back of an increase in car prices, said MAS and MTI.

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The decline in services cost eased in July at -0.8 per cent, compared to -1.0 per cent in June. 

This was due to holiday expenses and airfares falling at a slower pace while telecommunication services cost rose more rapidly.

The cost of retail and other goods also registered a smaller decline of -1.6 per cent in July, compared to -1.8 per cent in June.

This was due to a rise in the prices of telecommunications equipment, as well as a fall in prices of household durables and personal care products.

Accommodation inflation eased marginally in July at 0.4 per cent from 0.5 per cent in June due to a slower pace of increase in housing rents.

On a year-on-year basis, food inflation edged down to 2.2 per cent in July, compared to 2.3 per cent in June as inflation for non-cooked food fell, even as food services inflation remained broadly unchanged.

Electricity and gas costs saw a much sharper drop in July of -15.2 per cent, compared to -3.9 per cent in June.

This was due a steeper decline in electricity prices as the electricity tariff was revised downwards, the agencies said.

INFLATION TO REMAIN SUBDUED

MAS and MTI expected inflation to remain subdued, and maintained their forecast of MAS Core Inflation and CPI‐All Items inflation averaging between -1 per cent and 0 per cent in 2020.

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The agencies said external sources of inflation were likely to "remain benign" amid weak global demand conditions. Oil prices should stay low for an extended period, while international food commodity prices have also declined. 

However, supply chain disruptions associated with international measures to contain the COVID‐19 pandemic could continue to keep imported food prices elevated, they said.

In Singapore, subdued economic sentiment and weak labour market conditions will dampen consumer demand. This will cap price increases for discretionary goods and services, the agencies said.

Cost pressures are likely to remain low as some degree of spare capacity in the economy emerges, they added.

Source: CNA/reuters/ic

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