Singapore’s core and headline inflation continued their upward trend in 2021, with both metrics gaining in May, according to Consumer Price Index (CPI) data released by the Department of Statistics Singapore (SingStat) on June 23.
Core inflation, which measures price increments in sectors with the exception of accommodation and private transport, was up 0.8% y-o-y in May, following 0.6% in April.
In a joint statement released by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) on June 23, the higher core CPI is mainly contributed by higher services inflation and a smaller decline in the cost of retail & other goods.
Singapore’s headline inflation, or CPI-All items, which measures total inflation in the economy, rose 2.4% y-o-y in May, from 2.1% in April.
The higher headline inflation was mainly contributed by higher private transport, services and accommodation inflation.
Transport costs increased 11% y-o-y in May. Within the sector, private transport continued to see the highest increase at 14.5% y-o-y (vs. 12.9% in April), largely on account of a steeper increase in petrol prices as well as a pick-up in car prices at a faster pace.
Services inflation grew 1.4% y-o-y in May compared to 1.1% in April on the back of an increase in telecommunication services fees as well as higher point‐to‐point transport and health insurance inflation.
Accommodation inflation edged up 0.9% y-o-y in May compared to 0.7% in April as housing rents rose at a faster pace, while food inflation remained unchanged at 1%.
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Meanwhile, the cost of retail & other goods contracted 0.8% in May, though at a slower pace compared to 1.1% in April, as the price of household durables registered a larger increase, while that of clothing & footwear fell by a smaller extent.
Similarly, electricity & gas prices fell at a slower pace of 1.9% in May (vs. 2.4% in April), largely on account of the Open Electricity Market (OEM) having a smaller dampening effect on electricity prices following a slowdown in new take‐up rates, as well as a stronger pickup in gas prices.
Looking ahead, MAS and MTI anticipate that the upward pressure on global inflation will ease in the latter part of 2021 as surplus oil production capacity caps the extent of oil price increase, while continued negative output gaps in some of Singapore’s major trading partners should moderate import price pressures.
Headline CPI is expected to remain elevated at around current rates in the near term, and ease in the second half of the year as base effects fade.
Meanwhile, core inflation is expected to continue to gradually increase, though ongoing Covid-19-related restrictions could have an overall dampening effect on the pickup in underlying inflation.
MAS and MTI also anticipate that the uncertainty in the economic outlook will weigh on consumer sentiment and hence price increases in the near term, with wage growth expected to be muted as slack in the labour market will take time to be fully absorbed, while commercial rents are projected to stay low.
However, private transport and accommodation costs are expected to remain resilient on the back of firm demand for cars and rental accommodation.
To that end, MAS and MTI are projecting core inflation to average between 0%-1% in 2021, while headline CPI is forecasted to come in between 0.5%-1.2%.
Photo: Bloomberg
