Singapore's core inflation declines 0.2% year-on-year in June

Singapore's core inflation declines 0.2% year-on-year in June

The skyline of financial and business center are seen in the background
The skyline of financial and business center are seen in the background as people paddle surf along the East Coast Park beach in Singapore on Jul 17, 2020. (Photo: Roslan RAHMAN / AFP)

SINGAPORE: Singapore's core inflation dropped 0.2 per cent year-on-year in June, the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said in a joint news release on Thursday (Jul 23).

The drop in June continues from the 0.2 per cent year-on-year decrease recorded in May. This is the fifth straight month of year-on-year decline for the country's core inflation.

Core inflation – a key policy consideration for MAS – excludes the price of private transport and accommodation.

A steeper drop in the costs of services was offset by higher food inflation and smaller declines in the costs of retail and other goods, and electricity and gas in June, said MAS and MTI.

The headline consumer price index (CPI) or overall inflation fell 0.5 per cent year-on-year in June, easing from the 0.8 per cent decline in May.

This mainly reflected a smaller drop in private transport costs, which fell 4.4 per cent in June compared to 6.8 per cent in May.

This in turn was due to smaller declines in car and petrol prices, said the agencies.

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The cost of retail and other goods also registered a smaller decline of 1.8 per cent in June, compared to 2.3 per cent in May.

This was due to the prices of clothing, footwear and telecommunications equipment falling at a more gradual pace, said MAS and MTI.

On a year-on-year basis, food inflation edged up 2.3 per cent in June, compared to 2.2 per cent in May. This came on the back of a larger increase in the prices of non-cooked food items.

Meanwhile, electricity and gas costs in June fell at a slower rate of 3.9 per cent, compared to 4.6 per cent in May.

This was due to take-up rates for the Open Electricity Market continuing to dampen, the agencies said.

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

Services costs fell more steeply at 1 per cent in June, compared to 0.8 per cent in May. This was due to larger declines in holiday expenses and airfares, MAS and MTI said.

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INFLATION TO REMAIN SUBDUED

MAS and MTI expected inflation to remain subdued, and maintained their forecast of MAS Core Inflation and CPI‐All Items inflation averaging between -1 per cent and 0 per cent in 2020.

The agencies said external sources of inflation were likely to "remain benign" amid weak global demand conditions. Oil prices should stay low for an extended period, weighing on the prices of energy-related components of the CPI basket.

However, supply chain disruptions associated with international measures to contain the COVID‐19 pandemic could continue to put some upward pressure on imported food prices, they said.

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In Singapore, subdued economic sentiment and weak labour market conditions will dampen consumer demand. This will cap price increases for discretionary goods and services, the agencies said.

Cost pressures are likely to remain low as some degree of spare capacity in the economy emerges, they added.

INFLATION FOR GENERAL HOUSEHOLDS FALLS

The all-items CPI for general households in the first half of 2020 fell 0.2 per cent year-on-year – a reversal from the 0.5 per cent increase in the second half of 2019, the Singapore Department of Statistics (SingStat) said in a statement on Thursday.

Headline inflation for the lowest 20 per cent income group remained unchanged. The middle 60 per cent and highest 20 per cent income groups saw declines in prices of 0.1 per cent and 0.2 per cent year-on-year respectively.

Rates fell further after imputed rentals on owner-occupied accommodation were excluded. The CPI for the lowest 20 per cent, middle 60 per cent and highest 20 per cent income groups then declined by 0.1 per cent, 0.2 per cent and 0.3 per cent year-on-year respectively.

For all three income groups, inflation rates were held down by declines in holiday expenses and airfares, outpatient services costs, electricity costs, petrol and clothing and footwear prices.

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Prices for the highest 20 per cent income group fell by a larger extent as they saw a steeper decline in the costs of discretionary expenditure items such as holiday expenses and car prices, said SingStat.

The fall in airfares and petrol prices also had a larger impact on the CPI for this income group, as these items accounted for a larger share of their total expenditure.

The main positive contributors to inflation rates were higher food prices and bus and train fares.

These increases had a smaller impact on the CPI for the highest 20 per cent income group, as such items accounted for a smaller share of its total expenditure, said SingStat.

Source: CNA/dv

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