SINGAPORE: Singapore's core inflation inched up to 0.7 per cent year-on-year in December, mainly due to higher services inflation, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) said in a joint news release on Thursday (Jan 23).
This was a rise from the 0.6 per cent in November, and slightly higher than the 0.6 per cent forecast seen in a Reuters poll.
On a month-on-month basis, core inflation increased to 0.4 per cent in December from the -0.1 per cent the previous month.
Core inflation excludes the price of private transport and accommodation.
The headline consumer price index or overall inflation rose to 0.8 per cent year-on-year, slightly higher than estimates, and up from 0.6 per cent in the previous month.
This was due to an increase in private road transport and services inflation.
On a month-on-month basis, it rose by 0.3 per cent, the same pace of increase as in November.
Private road transport costs rose by 3.1 per cent year-on-year in December, up from the 2.3 per cent increase in the previous month. This was mostly due to a larger increase in petrol prices, which outweighed the smaller increases in the prices of cars and motorcycles and scooters.
Services inflation picked up to 1.3 per cent year-on-year in December, from 1.1 per cent in the preceding month, on the back of a larger increase in telecommunication services fees, education services fees and higher airfares.
Accommodation costs decreased by 0.1 per cent year-on-year in December, easing from the 0.2 per cent drop in November, as housing rentals declined more gradually.
Food inflation edged up to 1.8 per cent year-on-year in December, from 1.7 per cent in November, due to a faster pace of increase in the prices of non-cooked food and prepared meals.
The cost of electricity and gas declined by 11.4 per cent year-on-year in December, extending the 11.8 per cent drop in the previous month as the Open Electricity Market continued to have a dampening effect on electricity prices, said MAS and MTI.
The cost of retail goods fell by 0.7 per cent year-on-year in December, steeper than the 0.5 per cent fall in November.
This was because the costs of recreation and entertainment goods and clothing and footwear registered larger declines, negating the rise in the prices of personal care products.
For the whole of 2019, core inflation was 1 per cent, lower than the 1.7 per cent recorded in 2018.
Meanwhile, overall inflation rose to 0.6 per cent in 2019, from 0.4 per cent the previous year.
External sources of inflation are "likely to remain benign" in the quarters ahead, said MAS and MTI, citing weak demand conditions and generally well-supplied food and oil commodity markets.
However, oil prices could be volatile in the near term, reflecting geopolitical risks, said the two bodies.
Softening labour market conditions on the domestic front would lower wage growth in 2019 and 2020, as compared to 2018, said MAS and MTI.
At the same time, non-labour costs such as retail rents should stay subdued, while any costs passed through to consumers would be constrained by a subdued economic environment, they added.
Core inflation averaged 1 per cent last year, and is expected to come in between 0.5 and 1.5 per cent in 2020, they said.
Overall inflation is projected to average between 0.5 per cent and 1.5 per cent in 2020, as the "negative contribution of imputed rentals to headline inflation dissipates", said MAS and MTI.