Singapore's July core inflation highest in nearly four years

Singapore's July core inflation highest in nearly four years

People Orchard Road walking
Pedestrians cross a street at the Orchard Road shopping district in Singapore. (Photo: AFP/Roslan Rahman)  

SINGAPORE: Singapore's core consumer price index (CPI) rose at its fastest pace in nearly four years in July in year-on-year terms, due to higher electricity and gas costs, data showed on Thursday (Aug 23).

Core CPI in July rose 1.9 per cent from a year earlier, faster than the 1.7 per cent rise in the previous month. The median forecast in a Reuters poll was also for a 1.7 per cent rise.

This is the highest since August 2014, when core inflation rose to 2 per cent from the year earlier.

"This reflects an upward revision in electricity tariffs in July following the pickup in global oil prices in the preceding quarter," the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said in a press release.

The cost of electricity and gas surged 12.7 per cent in July from the year earlier. In June, it rose 3.7 per cent.

Singapore's headline CPI, however, rose 0.6 per cent in July from a year earlier, in line with June's increase and slightly lower than the median forecast in a Reuters poll which called for a 0.7 per cent rise.

READ: Singapore's inflation rises to 0.6% year-on-year in June, highest in 7 months

In July, food inflation came in at 1.5 per cent, unchanged from the previous month.

Services inflation moderated to 1.5 per cent from 1.7 per cent in June. This was on account of smaller year-ago increases in the cost of education and healthcare services, as well as airfares and domestic services fees.

Private road transport costs fell 0.2 per cent, reversing the 0.4 per cent increase in June. This was due to a steeper year-ago drop in car prices alongside a decline in Certificate of Entitlement (COE) premiums, they added.

Accommodation costs slid 3 per cent in July - the same rate as in June. The pace of decline in housing rentals moderated, but the effect was offset by a smaller year-ago increase in the cost of housing maintenance and repairs.

INFLATION LIKELY TO RISE GRADUALLY: MAS

Looking ahead, MAS and MTI said they expect imported inflation to rise mildly, due in part to the rally in global oil prices as well as an expected increase in global food commodity prices.

Domestic sources of inflation are also expected to increase alongside a faster pace of wage growth and a pickup in domestic demand.

“However, the extent of consumer price increases will remain moderate, as retail rents have stayed relatively subdued and firms’ pricing power may be constrained by market competition,” they said.

For the full year, MAS expects core inflation to rise gradually over the remaining months to average in the upper half of the 1 to 2 per cent forecast range. Similarly, headline inflation is projected to come within the upper half of the 0 to 1 per cent forecast range for the full year.

READ: Government will do its part to alleviate concerns about cost of living, says PM Lee

"With Brent crude oil prices moving higher, the risk is biased towards higher, rather than lower, inflationary environment in Singapore in the months ahead," said UOB economist Francis Tan.

"Cost-push type of inflation - rather than a demand-pull type of inflation - due to higher international oil prices will only mean lower purchasing power for Singaporeans," he added.

Dr Tan Khay Boon, senior lecturer at SIM Global Education, added that while overall inflation is edging upwards marginally and is not alarming at this stage, there are concerns that healthcare and education costs are rising, making them less affordable for lower-income households. 

"The higher core inflation relative to headline inflation also means that inflation pressure is increasingly real to households, and this has arisen from higher costs in utilities and transport which are in turn due to higher food and oil prices," he added.

Meanwhile, UOB's Mr Tan said that with MAS keeping its inflation expectations unchanged and ongoing trade concerns potentially slowing down global economic growth in the months ahead, the central bank is likely to remain cautious and maintain its current monetary policy stance.

Source: Reuters/CNA/hs(aj)

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