Singapore's core inflation eases slightly in June but stays positive

SINGAPORE: Consumer prices in Singapore continued to rise in June but at a slightly slower pace, reflecting a steeper decline in the cost of retail and other goods.

Core inflation eased to 0.6 per cent year-on-year, down from the 0.8 per cent increase in May, according to data released by the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) on Friday (Jul 23).

June was the fifth straight month that core inflation has remained positive.

Singapore's core inflation measure excludes the cost of private transport and accommodation.

The headline consumer price index (CPI), or overall inflation, rose 2.4 per cent year-on-year - unchanged from May. This was due to higher inflation in private transport and accommodation broadly offsetting a sharper drop in the price of retail and other goods, said the authorities.

RETAIL PRICES FALL, CAR PRICES AND RENTS RISE

The cost of retail and other goods fell more sharply by 1.8 per cent year-on-year in June, mostly due to a steeper decline in the price of clothing and footwear.

This was offset by higher inflation in private transport, which picked up to 14.9 per cent from 14.5 per cent in May, mainly due to a steeper increase in car prices.

Accommodation inflation also saw an uptick to 1.1 per cent, up from 0.9 per cent in May, as housing rents rose at a faster pace.

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Rise in food inflation edged down to 0.9 per cent, on the back of lower inflation for non-cooked food.

Services inflation stayed unchanged from May, rising 1.4 per cent year-on-year as lower inflation for point‐to‐point transport services was broadly offset by higher inflation for tuition and other fees and recreational and cultural services.

Electricity and gas prices saw a slightly smaller decline of 1.8 per cent as take-up in the open electricity market slowed, reducing its dampening effect on electricity prices, said the authorities.

CORE INFLATION TO INCREASE, DAMPENED BY TIGHTER COVID-19 MEASURES

External inflation has risen amid the increase in global oil prices and turnaround in producer price inflation in major economies, said the authorities.

However, they expected upward pressure on global inflation to ease later in the year, with surplus oil production capacity helping to cap oil price increases.

"While there is the risk that inflation could persist in some of Singapore's major trading partners, this would be tempered by the continued negative output gaps in many of these economies, which should help to moderate Singapore's overall import price inflation."

Domestically, the authorities expected core inflation to gradually increase in the coming quarters, with momentum dampened by the return to tighter COVID-19 measures under Phase 2 (Heightened Alert).

Uncertainty over Singapore's economic outlook was also expected to weigh on consumer sentiment and price increases in the near term.

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"For the year as a whole, wage growth is expected to be muted as the slack in the labour market will take time to be fully absorbed, while commercial rents are projected to stay low," said the authorities.

As for overall inflation, this was expected to ease later in the year. Private transport and accommodation costs should stay "resilient" on the back of firm demand for cars and rental housing, although the pace of increase in private transport cost was likely to slow, they added.

MTI and MAS maintained their forecast for core inflation to average 0 to 1 per cent, but adjusted average overall inflation upwards to between 1 and 2 per cent for 2021.