Singapore core inflation falls into negative territory for the first time in a decade

Singapore core inflation falls into negative territory for the first time in a decade

People wearing protective face mask at Orchard Road
People are seen wearing protective face masks at Orchard Road, Singapore on Jan 28, 2020. (Photo: Gaya Chandramohan)

SINGAPORE: Singapore's main price gauge slipped into deflation for the first time in more than a decade in February, data showed on Monday (Mar 23).

Prices fell 0.1 per cent from a year earlier, according to a joint release by the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI).

Economists polled by Reuters had been expecting a 0.1 per cent rise in core inflation but instead declines in airfares and holiday expenses due to the coronavirus pandemic led to deflation for the first time since January 2010.

Core inflation - a key policy consideration for the Monetary Authority of Singapore (MAS) - excludes the price of private transport and accommodation.

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"In the quarters ahead, external sources of inflation are likely to remain benign, amid weak demand conditions and generally well‐supplied food and oil commodity markets," MTI and MAS said.

They added that oil prices declined sharply in March and could stay depressed for an extended period amid the global economic slowdown and an anticipated rise in oil supply. 

But international measures to contain the COVID‐19 outbreak have led to supply chain disruptions, which could put some upward pressure on imported food prices, the joint statement added.

Singapore's headline consumer price index rose 0.3 per cent from a year earlier, slightly below poll expectations of 0.35 per cent. 

Private transport inflation was lower in February at 2.4 per cent year-on-year from 4.6 per cent in the previous month. This was due to a smaller increase in car and petrol prices. 

Food inflation edged down by 0.1 per cent from 1.7 per cent in January as the prices of prepared meals recorded smaller increased while non‐cooked food inflation was broadly unchanged.

The cost of electricity and gas fell at a slower pace to -7.4 per cent year-on-year in February as the Open Electricity Market (OEM) had a smaller dampening effect on electricity prices, following a slowdown in new take‐up rates. 

Accommodation costs registered a larger increase at 0.4 per cent year-on-year in February - up from 0.3 per cent in January - in line with a stronger pickup in housing rentals.

The cost of retail and other goods fell at a more gradual pace to -1.0 per cent in February from the -1.4 per cent in January, as clothing and footwear items and medicines and health products recorded smaller price declines.

SUBDUED INFLATIONARY PRESSURES EXPECTED IN NEAR TERM

"The COVID‐19 outbreak has weighed heavily on the aviation and tourism industries, which could in turn lower the prices of travel‐related items in the CPI basket. In addition, the implementation of safe distancing measures and fall in tourist arrivals have dampened consumer demand, and will cap any price increases for discretionary goods and services," the authorities said.

Labour market conditions are expected to continue to soften and dampen wage growth in 2020.

With the economic uncertainty is also likely to discourage firms from passing any cost increases to consumers, they added.

"Inflationary pressures are thus expected to remain subdued in the near term," the joint statement said.

The authorities added that they will closely monitor price trends and assess the impact of the COVID‐19 outbreak on inflation. 

The MAS Core Inflation and CPI‐All Items inflation forecast ranges will be released in MAS’ upcoming Monetary Policy Statement.

Source: Reuters/CNA/mn(mi)

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