Singapore’s core inflation eases to 1.8% in September

Singapore’s core inflation eases to 1.8% in September

Orchard Road
A general view shows the prime district area around Orchard Road with hotels, shopping mall and residential housing on Mar 6, 2014 in Singapore. (Photo: Roslan Rahman / AFP)

SINGAPORE: Singapore's core consumer price index (CPI) eased to 1.8 per cent year-on-year in September from 1.9 per cent the previous month, according to the latest data.

A moderation in retail inflation had offset higher services inflation, the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said in a press release.

The core inflation measure excludes changes in the price of cars and accommodation.

Headline inflation came in at 0.7 per cent, unchanged from August, as a smaller decline in accommodation costs and higher services inflation was offset by lower retail inflation.

The overall cost of retail items rose by 1.5 per cent in September, moderating from the 2.0 per cent increase in August. This mostly reflected a slower pace of increase in the prices of clothing and footwear, as well as a steeper fall in the prices of recreation and entertainment goods as well as telecommunication equipment, the release said.

In September, food inflation edged down to 1.6 per cent from 1.7 per cent in the preceding month, as the prices of non-cooked food items registered a smaller increase.

Services inflation came in at 1.4 per cent, slightly higher than the 1.3 per cent in August. This mainly reflected a larger increase in education services fees and a smaller decline in telecommunication services fees, which had collectively more than offset a moderation in the pace of increase in recreational and cultural services fees.

Accommodation costs fell by 2.5 per cent, easing from the 2.6 per cent decline in August, on account of a slower pace of decline in housing rentals.

Private road transport costs slipped 0.1 per cent, which was less than the 0.2 per cent decline in August, as the prices of motorcycles and scooters fell in September. However, the decline was more than offset by a steeper increase in petrol prices, a smaller drop in car prices, as well as an increase in Electronic Road Pricing (ERP) charges.

Dr Tan Khay Boon, senior lecturer at SIM Global Education, said that he expects the new cooling measures implemented by the Government in July to exert downward pressure on the imputed rent, causing further deflation on housing.

"The abundance in number of COEs will also reduce the private road transport costs," Dr Tan said.

"However, the upward trend in oil price is likely to raise utility prices and public transport fares with the average households feeling more inflationary pressure due to higher food price, medical care costs and utilities."

Looking ahead, MAS and MTI said that imported inflation is likely to increase on account of higher global oil and food prices.

“On the domestic front, the improving labour market should underpin a faster pace of wage growth in 2018 and 2019, compared to 2017. Growth in the unit labour cost for services has picked up recently. As domestic demand strengthens further, there could be a greater pass-through of higher import and labour costs to consumer prices," they said.

"However, the extent of overall price increases will be capped by greater market competition in several consumer segments, such as telecommunications, electricity and retail,” they added.

MAS expects core inflation to rise modestly in the months ahead and come in at the forecast range of 1.5 per cent to 2 per cent this year and between 1.5 per cent and 2.5 per cent in 2019.

CPI-All Items inflation is projected to be about 0.5 per cent this year, before picking up to 1 per cent to 2 per cent next year.

UOB senior economist Alvin Liew said that the MAS "sounded more hawkish in its outlook", and may further tighten their current monetary stance at their April 2019 meeting via another slight increase in the policy slope.

The monetary authority on Oct 12 tightened monetary policy for the second time this year, saying it expects the economy to continue to expand steadily and core inflation to rise.

"The biggest uncertainty for this view is how US-China trade tensions will evolve in the months leading up to April 2019," Mr Liew said.

Source: CNA/mn(aj)

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