Singapore March core inflation quickens the most in more than a year

Singapore March core inflation quickens the most in more than a year

People walk during their lunch break in the financial business district of Raffles Place
People are seen at Raffles Place in Singapore on Jan 11, 2021. (Photo: AFP/Roslan Rahman)

SINGAPORE: Singapore's key price gauge rose by the fastest pace in more than a year in March, in part due to higher services inflation as well as smaller declines in retail and other goods, official data showed on Friday (Apr 23).

The core inflation rate - the central bank's favoured price measure - rose to 0.5 per cent in March from a year earlier, compared with 0.2 per cent in the prior month. A Reuters poll of economists had forecast an increase of 0.4 per cent.

Economists are keeping an eye on inflation data for any signs that may prompt the Monetary Authority of Singapore (MAS) to tighten its policy as the economy recovers, but they said Friday's data was still well within the central bank's expectations.

Last week, the MAS kept monetary policy settings unchanged and said the accommodative stance was appropriate due to a benign inflation outlook and global economic uncertainties caused by the pandemic.

"It looks pretty difficult for them to normalise policy this year," said Barclays regional economist Brian Tan.

For 2021, Singapore's central bank expects core inflation to average 0 to 1 per cent, while headline inflation is forecast to come in between 0.5 per cent and 1.5 per cent.

While inflation may pick up due to low base effects from last year, it was unlikely to accelerate in the second half of 2021 as business cost pressures are contained, the MAS and Ministry of Trade Industry (MTI) said.

Singapore's headline consumer price index (CPI) spiked to 1.3 per cent in March year-on-year - the fastest in nearly four years - from 0.7 per cent in February.

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Separately, Singapore's private home prices rose 3.3 per cent in January-March from the prior quarter, the fastest pace in more than two years, data from the Urban Redevelopment Authority showed, adding to expectations for more cooling measures.


The rise in headline CPI was driven by higher private transport and services inflation, as well as smaller reductions in the costs of retail and other goods, as well as electricity and gas, said MTI and MAS.

Private transport costs rose by 7.2 per cent in March, quicker than February's 4.2 per cent increase.

This was due to a larger increase in car prices and a turnaround in petrol costs, which was partly on account of low-base effects from March last year amid the plunge in global oil prices.

Services inflation also picked up to 1.2 per cent in March from 0.5 per cent in February, reflecting steeper increases in point‐to‐point transport services fees - partly due to low-base effects - and health insurance costs.

In addition, outpatient service fees rose in March as subsidies introduced under the Government's COVID-19 response in February 2020 ceased to weigh on year-on-year inflation.

Retail and other goods fell at a slower rate of -1.5 per cent compared to -1.9 per cent in February, on the back of gentler declines in the prices of clothing and footwear, and personal effects. The cost of household durables also rose more strongly.

Electricity and gas prices also decreased at a slightly lower rate (-9.7 per cent for March compared to -9.8 per cent in February) amid slowdown in the open electricity market's take-up rates.

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Accommodation inflation was unchanged at 0.5 per cent, as housing rents continued to rise at a steady pace.

Food inflation dipped to 1.4 per cent from 1.6 per cent, as the prices of both non-cooked food and prepared meals rose at a more moderate pace.


MTI and MAS said external inflation is expected to continue rising in the near term amid the recovery in global oil prices and the turnaround in producer price inflation in a number of major economies.

"While there are some upside risks, the upward pressure on global inflation should ease in the latter part of 2021," said the authorities.

"Surplus oil production capacity should cap the increase in oil prices, while lingering negative output gaps in some of Singapore’s major trading partners should keep a lid on import price pressures."

MAS and MTI added: "On the domestic front, price pressures are likely to gradually pick up and broaden across the CPI basket as labour market conditions improve and private consumption recovers."

But the authorities expect wage growth 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".

Source: CNA/Reuters/jt