Consumer prices up for fifth month in a row

Core inflation rose to 1.7%, the highest since Oct 2014, due to rise in gas, electricity costs amid higher oil prices

Consumer prices went up again last month - the fifth month in a row - although the pace has slowed a little.

Headline inflation was 0.4 per cent last month, down from 0.7 per cent in March, largely because the disbursement of service and conservancy charge (S&CC) rebates cut the cost of housing maintenance and repairs.

However, core inflation - which strips out accommodation and private road transport costs to better gauge everyday expenses - rose to 1.7 per cent last month, the highest level since October 2014.

This was due to an 18.7 per cent increase in the cost of electricity and gas, which rose on the back of higher oil prices.

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The Ministry of Trade and Industry (MTI) and the Monetary Authority of Singapore (MAS) noted in a joint statement yesterday that crude prices have risen from last year's trough, and are likely to average higher this year.

However, they added, upward pressures would be capped by elevated inventories as well as rising United States crude oil production.

Ms Selena Ling, OCBC Bank's head of treasury research and strategy, noted that the bank had earlier pared its forecast for oil to around US$55 a barrel, as it expects the Organisation of Petroleum Exporting Countries to extend its oil production cuts.

"We tip core inflation to continue to climb and extend beyond the 2 per cent year-on-year level before the year is out, but full-year core inflation is still likely to average 1.6 per cent year on year for 2017," she said.

The MTI and MAS noted that administrative price adjustments, such as the water price hike unveiled in Budget 2017 and increased S&CC fees, will also contribute to a temporary increase in inflation this year.

The MAS noted in its macroeconomic review last month that the direct impact of the water price hike is estimated to add around 0.1 percentage point to both headline and core inflation this year.

Still, the MTI and MAS said domestic sources of inflation remain relatively muted overall.

"Conditions in the labour market have slackened, and this is expected to dampen underlying wage pressures, even as commercial and retail rents have continued to ease. The subdued economic environment will also limit the extent to which businesses pass on higher costs to consumers."

Last month, private road transport inflation inched up to 7 per cent, from 6.9 per cent in March, due to a faster pace of increase in car and petrol prices.

Services inflation edged up to 1.7 per cent last month from 1.6 per cent in March, largely on account of higher telecommunication service fees.

Meanwhile, food inflation was stable at 1.3 per cent last month.

A version of this article appeared in the print edition of The Straits Times on May 24, 2017, with the headline 'Consumer prices up for fifth month in a row'. Print Edition | Subscribe