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Singapore's core inflation contracts for 7th consecutive month in August

Singapore's core inflation contracts for 7th consecutive month in August

People are seen at Raffles Place in Singapore on Sep 15, 2020. (Photo: AFP/Roslan Rahman)

SINGAPORE: Singapore's core inflation contracted for the seventh consecutive month in August, with authorities expecting economic challenges and a weak labour market to continue to dampen consumer demand.

Core inflation, a key policy consideration for Singapore's central bank, fell 0.3 per cent in August from the same period last year, said the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said in a joint news release on Wednesday (Sep 23).

The gauge, which excludes the price of private transport and accommodation, had fallen 0.4 per cent in July.

The pace of decline had moderated mainly due to a smaller decline in the cost of services, retail and other goods, as well as electricity and gas, said MAS and MTI.

The headline consumer price index (CPI) or overall inflation remained unchanged at -0.4 per cent year-on-year in August after a sharper fall in private transport costs was offset by a more moderate decline in the core CPI components.

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The cost of services came in at -0.5 per cent in August, easing from July's -0.8 per cent. This was due to a smaller fall in point-to-point transport services costs and a larger increase in telecommunication services fees.

The retail and other goods segment also recorded a smaller decline of 1.3 per cent in August, compared with a decline of 1.6 per cent in July, as prices of clothing, footwear and recreational goods fell at a more moderate pace.

Electricity and gas costs fell at a slower rate of 14.6 per cent in August, compared with a fall of 15.2 per cent in July, due to the slowing down of new subscriptions under the Open Electricity Market (OEM).

Retail electricity price plans under the OEM are generally lower than SP Group's electricity tariff, said MAS and MTI.

"Hence, as the take‐up of OEM plans slows on a year‐on-year basis, the dampening effect of the OEM on electricity prices also declines," they said.

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Meanwhile, accommodation inflation remained unchanged in August at 0.4 per cent, while food prices rose at a slower pace of 1.8 per cent.

Private transport costs registered a larger drop of 2.3 per cent in August, compared with 2.1 per cent in July.

INFLATION EXPECTED TO REMAIN SUBDUED

MAS and MTI said inflation is expected to remain subdued overall, and their forecast of  MAS Core Inflation and CPI‐All Items inflation averaging between -1 per cent and 0 per cent this year.

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

Oil prices are expected to stay low for an extended period while international food commodity price increases should generally be contained amid improved supply conditions.

Source: CNA/lk

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