Singapore core inflation rises to 2.7% in August, first increase in 6 months

SINGAPORE: Singapore’s core inflation rose to 2.7 per cent year-on-year in August, the first time it has increased in six months.

The last time core inflation rose was in February.

The increase in August from the 2.5 per cent in July was largely due to a rise in services inflation, said the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) on Monday (Sep 23).

A Reuters poll of economists had forecast a figure of 2.6 per cent for August.

Overall or headline inflation in August eased to 2.2 per cent year-on-year, as a fall in private transport prices more than offset the increase in core inflation.

Core inflation excludes accommodation and private transport.

On a month-on-month basis, core inflation increased by 0.3 per cent while overall inflation rose by 0.7 per cent. 

Services inflation rose to 3.3 per cent in August, up from 2.9 per cent the previous month. This was due to holiday expenses picking up more strongly while airfares recorded smaller declines. 

Retail and other goods inflation also increased, coming in at 0.4 per cent in August, a small increase from 0.3 per cent in July. This was due to a larger increase in the prices of household durables. 

Accommodation inflation edged down to 2.9 per cent in August from 3.1 per cent in July, as the rate of increase in housing rents slowed.

Private transport inflation came in at -1 per cent in August, compared with 0.9 per cent in July. The fall in prices was due to a steeper decline in car prices even as petrol prices rose at a slower pace.

Electricity and gas inflation remained unchanged at 6.6 per cent in August as a smaller increase in electricity prices was offset by a larger increase in gas prices.  

Food inflation was also unchanged at 2.7 per cent in August, as an increase in non-cooked food inflation was offset by a fall in food services inflation. 

OUTLOOK

Singapore’s core inflation is expected to stay on a "gradual moderating trend" for the rest of the quarter and step down further in the fourth quarter, said MAS and MTI.

"Global energy prices have fallen in recent weeks, while the costs of Singapore’s imported intermediate and final manufactured goods have continued to be on a broad decline," they added.

"Despite services inflation experiencing some volatility, due mainly to overseas travel services, it remains on a moderating trend and should ease further over the rest of 2024."

The gradual strengthening of the Singapore dollar trade-weighted exchange rate should continue to temper imported inflation, said MAS and MTI.

On the domestic front, increases in unit labour costs have slowed in tandem with the cooling labour market.

Businesses are likely to continue passing through the earlier increases in labour costs to consumers, but at a "reduced pace", said MAS and MTI.

Private transport inflation is expected to moderate from last year due to the larger projected Certificate of Entitlement (COE) supply this year. 

Accommodation inflation should also continue to ease as the supply of housing units available for rental increases over the year, added the authorities. 

For the year as a whole, core inflation is forecast to average between 2.5 per cent and 3.5 per cent, while overall inflation should average between 2 per cent and 3 per cent. 

Excluding the transitory effects of the 1 percentage point increase in the GST rate to 9 per cent, both core and overall inflation are expected to come in at 1.5 per cent to 2.5 per cent.

"Risks to the inflation outlook remain. Domestically, stronger-than-expected labour market conditions could lead to a re-acceleration of wage growth," said MAS and MTI.

"Fresh geopolitical shocks, adverse weather events and renewed transportation disruptions around the world could put upward pressure on global energy and food commodity prices, as well as shipping costs.

"Conversely, an unexpected weakening in the global economy could induce a greater easing of cost and price pressures."