Singapore's August core inflation at 1.9%; no change from July

Singapore's August core inflation at 1.9%; no change from July

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SINGAPORE: Singapore's August core consumer price index (CPI) stood at 1.9 per cent, unchanged from the previous month, the Monetary Authority of Singapore (MAS) said on Monday (Sep 24).

Higher retail and food inflation had offset a moderation in services inflation, MAS said in a press release.

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

Headline inflation edged up to 0.7 per cent year-on-year from 0.6 per cent in August, in line with expectations, as accommodation costs fell less sharply.

Ms Selena Ling, head of treasury research & strategy at OCBC Bank, said that August's inflation data presents a temporary setback to hawkish expectations, but that they still anticipate the MAS core inflation to cross the 2 per cent handle soon "amid a relatively resilient domestic economy and notwithstanding the escalating US-China trade tensions".

"At this juncture, the jury remains mixed on the Monetary Authority of Singapore's Monetary Policy Statement decision," she said.

DBS senior economist Irvin Seah, on his part, said that he believes that the pick-up in inflation is insufficient to prompt the MAS to tighten monetary policy further considering the uncertainties in the external environment and potential downside risk to growth in the medium term.

"There is enough room for the central bank to remain status quo on the current exchange rate policy stance in the upcoming October meeting," Mr Seah said.

READ: Singapore's July core inflation highest in nearly four years

READ: To tighten or not: Economists split on upcoming MAS policy decision amid trade risks

By sector, housing costs fell by 2.6 per cent in August, moderating from a 3 per cent decline in July. 

This reflects a slower pace of decline in housing rentals and a larger increase in the cost of housing maintenance & repairs, MAS said.  

Private road transport costs fell by 0.2 per cent, unchanged from the previous month as a smaller fall in car prices was offset by a less steep increase in petrol prices. 

The overall cost of retail items increased by 2 per cent due mostly to a faster pickup in the prices of clothing and footwear, and personal care products. Food inflation edged up to 1.7 per cent.

Services inflation eased to 1.3 per cent from 1.5 per cent the month before. A decline in telecommunication services fees had more than offset a faster pickup in airfares, MAS said.


MAS core inflation is expected to rise gradually over the course of 2018 to average in the upper half of the 1 to 2 per cent forecast range for the full year. 

Similarly, the headline inflation is projected to be within the upper half of the 0 to 1 per cent forecast range, MAS said.

Global oil prices have rallied since the start of the year and are expected to average higher for 2018 as compared to 2017, said MAS. Meanwhile, global food commodity prices are projected to rise slightly. 

Domestic sources of inflation are 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. 

Accommodation costs are forecast to fall by a smaller extent than in 2017, while private road transport inflation should decline in 2018, it added.

Dr Tan Khay Boon, senior lecturer at SIM Global Education, said that higher food prices, health care costs and education fees are likely to be the three areas where households encounter the most inflationary pressure.

Higher oil prices will also continue to push up the prices of transport and utilities, he said, adding that it is not clear at this stage if the liberalisation of the electricity market will be able to bring down household electricity costs

"More subsidies on healthcare and education may be needed to help low-income households to meet their needs in these two areas," Dr Tan said.

Source: CNA/hm(db)/aj(hm)