Singapore’s core inflation falls to -0.2% in January as costs of services decline

Singapore’s core inflation falls to -0.2% in January as costs of services decline

Singapore city skyline
The Singapore city skyline as seen from Jubilee Bridge (Photo: Jeremy Long)

SINGAPORE: Consumer prices in Singapore declined in January, albeit at a slower rate, as the authorities forecast a "mildly positive" turn this year.

Core inflation fell to to -0.2 per cent year-on-year in January, compared to -0.3 per cent in December last year, data from the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) showed on Tuesday (Feb 23).

The slower rate of decline in January was due to a smaller fall in services costs. 

Services costs fell by -0.3 per cent in January, mainly due to higher tuition and other fees and point-to-point transport services costs.

Core inflation excludes the price of private transport and accommodation.

The headline consumer price index (CPI), or overall inflation, rose to 0.2 per cent in January, up from 0 per cent in December, driven by the pickup in core inflation as well as higher private transport and accommodation costs.

READ: Singapore economy shrinks a record 5.8% in a pandemic-hit 2020

FALL IN COSTS OF SERVICES

In January, services costs fell by -0.3 per cent, compared with -0.8 per cent in December. 

The fall in services costs was also driven by a "milder pace of decline" in holiday expenses, said MAS and MTI. However, most of the components in the holiday expenses CPI were imputed using the overall change in overall inflation as they remain unavailable for consumption due to international travel restrictions.

Food inflation dipped to 1.5 per cent in January from 1.6 per cent in December as the prices of non-cooked food and restaurant meals rose at a more moderate pace.

The cost of electricity and gas saw a larger decline at -9.7 per cent in January, compared to -6.7 per cent in December, on account of a steeper drop in electricity prices as the electricity tariff was revised downwards.

“On a year-on-year basis, the electricity tariff fell by 14.4 per cent in January, a steeper pace of decline than the 8.5 per cent drop in the previous month,” said MAS and MTI.

The cost of retail and other goods fell at a slightly steeper pace to -1.3 per cent in January from -1.2 per cent in December, mainly due to larger declines in the prices of personal care products, and clothing & footwear.

Private transport costs rose to 1.9 per cent in January from 1.2 per cent the previous month due to a larger increase in car prices and a more modest fall in petrol prices.

Accommodation inflation also picked up at 0.5 per cent in January, compared to 0.3 per cent in December, as housing rents increased at a faster rate with the expiry of rental rebates given to households living in public rental flats.

“Households living in public rental flats received 50 per cent rental rebates from October 2020 to December 2020 as part of government measures to help households cope with the economic impact of the pandemic,” said the agencies.

READ: Commentary: Singapore economy set for V-shaped recovery this year but jobs market may take longer to rebound

EXTERNAL INFLATION LIKELY TO PICK UP

MAS and MTI said external inflation is likely to pick up in the quarters ahead amid the expected recovery in global oil prices. However, the extent of the increase will be capped by persistent negative output gaps in Singapore’s major trading partners.

“On the domestic front, cost pressures are expected to stay low, as wage growth and commercial rents are likely to remain subdued,” said the agencies, adding that some components of domestic services inflation could also gradually increase, in tandem with the economic recovery.

For the year, core inflation is forecast to turn mildly positive this year, "as the projected rise in oil prices from a year ago leads to a pickup in electricity and gas tariffs, and the disinflationary effects of government subsidies introduced in 2020 fade", said MAS and MTI.

Meanwhile, accommodation costs have stabilised, with housing rents in some areas registering increases. Private transport costs have risen on the back of firm demand for cars and higher petrol costs.

Core inflation this year is expected to average 0 per cent to 1 per cent, while overall inflation is expected to be between -0.5 per cent and 0.5 per cent.

Source: CNA/vc(ta)

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