Singapore’s core and headline inflation remained in the green with both metrics edging up in March.
Core inflation – which gauges price increments to sectors other than accommodation and private transport – was up by 0.5% y-o-y, according to the Consumer Price Index (CPI) released by the Department of Statistics (Singstat) on Apr 23.
This is a up from the 0.2% posted in February and follows higher services inflation as well as smaller declines in the costs of electricity and retail & other goods.
Meanwhile, headline inflation – the measure of the total inflation in the economy – picked up from February’s 0.7% to hit 1.3% in March.
This came in response to higher private transport inflation as well as core inflation, the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) detail in a joint release.
Private transport inflation spiked by 7.2% y-o-y in March, from 4.2% in the previous month. This follows higher car prices and a turnaround in petrol costs that is partly attributed to the low base in 2020 due to the plunge in global oil prices.
Services inflation had similarly picked up by 1.2% y-o-y in March, from February’s 0.5%. This is reflective of increases in point-to-point transport services fees which partly comes from the low base effects.
Higher costs for health insurance costs outpatient services also contributed to the rise in services inflation.
Conversely, accommodation inflation remained flat at 0.5% in March as housing rents continued to rise at a steady pace.
Meanwhile, food inflation – while expansionary –edged down to 1.4% in March, from 1.6% in the month before. This comes as the prices of non-cooked food and prepared meals had risen at a more moderate pace.
Prices of the remaining segments remained contractionary, despite showing signs of improvement in March.
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Electricity & gas prices for one declined at a slower rate of -9.7% in March compared to -9.8% in the previous month. This is as the Open Electricity Market had a smaller dampening effect on electricity prices after the slowdown in new take-up rates.
Likewise, the cost of retail & other goods fell at a more gradual pace of -1.5% for the prices of clothing & footwear and personal effects saw smaller declines. A stronger increase in the cost of household durables simultaneously also contributed to the segment’s performance.
For comparison, the price levels for retail & other goods was -1.9% in February.
Looking ahead, MAS and MTI expect core inflation to average between 0% and 1%, while headline inflation is expected to fall between 0.5% and 1.5%.
“[Headline] inflation and MAS Core Inflation are both forecast to step up in the months ahead, reflecting in part low base effects from last year and the effects of stronger domestic demand,” the authorities explain.
External inflation is also expected to continue rising in the near term amid the recovery in global oil prices and the turnaround in producer price inflation in a number of major economies.
However, the upward pressure on global oil prices is slated to ease in the latter part of 2021, mull MAS and MTI.
“Surplus oil production capacity should cap the increase in oil prices, while lingering negative output gaps in some of Singapore’s major trading partners should keep a lid on import price pressures,” they elaborate.
Back home, prices pressures are expected to pick up gradually but are “unlikely to accelerate in the second half of the year as business cost pressures are contained,” say MAS and MTI.
Economists from RHB’s Singapore Research team expect inflationary pressures to persist in the first half of this year.
“Global commodity prices have remained high, with crude oil prices rising for the 11th consecutive month. As such, we expect this to lead to the increase in electricity and gas tariffs as well as petrol costs,” they explain.
They add that a gradual recovery in the labour market could translate to a pick up in price pressures as well a renewed demand for consumption.
