Singapore’s CPI-All Items inflation (or headline inflation) increased by 6.3% on a y-o-y basis in February, down from the 6.6% y-o-y growth in January. The lower inflation growth was due to lower private transport inflation.
On a m-o-m basis, February’s headline inflation grew by 0.6%.
The Monetary Authority of Singapore’s (MAS) core inflation which excludes private transport and accommodation and is MAS’s preferred gauge, rose by 5.5% y-o-y. On a m-o-m basis, MAS core inflation eased to 0% compared to January's 0.8% m-o-m growth as a result of the GST increase.
In February, higher prices were seen across all industries with the highest y-o-y growths seen in transport and food at 9.7% y-o-y and 8.1% y-o-y. That said, private transport inflation slowed due to a smaller increase in car prices and a decline in petrol prices.
Services inflation also saw a moderation due to lower airfares. Accommodation inflation, too, edged down as housing rents rose at a slower pace.
Food inflation stood unchanged as the sharper increase in non-cooked food prices was offset by the smaller increase in the prices of prepared meals.
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Meanwhile, electricity & gas inflation picked up on the back of a larger increase in electricity costs. Retail & other goods inflation also saw an increase due to the higher tobacco excise duty and a faster pace of increase in the prices of personal care products and recreational & cultural goods.
In its outlook statement, MAS and the Ministry of Trade and Industry (MTI) note that regional inflation looks to stay as growth in Asia is expected to be resilient. As such, Singapore’s non-oil import prices could remain relatively firm for some time.
On the domestic front, unit labour costs are expected to increase further in the near term with businesses expected to continue to pass through accumulated import, labour and other costs to consumer prices.
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An increase in costs for cars and accommodation are also likely to stay firm in the quarters ahead on the back of the tight certificate of entitlement (COE) quotas for cars and strong demand for rental housing, respectively.
Further to their statement, MAS and MTI project MAS core inflation to remain above 5% y-o-y in the 1Q2023.
Core inflation is also expected to remain elevated in the first half of 2023 before slowing "more discernibly" in the second half of the year as the current tightness in the domestic labour market eases and global inflation moderates.
For 2023, headline and core inflation are projected to average 5.5% – 6.5% and 3.5 – 4.5%, respectively. Excluding the transitory effects of the one percentage point increase in Singapore's GST in January, headline inflation for 2023 is expected to come in at 4.5% – 5.5% while core inflation is expected to come in at 2.5% – 3.5%.
"There are upside risks to the inflation outlook, including from fresh shocks to global commodity prices and more persistent-than-expected external and domestic sources of inflation," say MAS and MTI.
