Falling headline inflation likely hit bottom in June, will rise in coming months, says MAS

Headline CPI has been falling on an annual basis since Nov 2014, hit by lower global oil prices as well as falls in housing rents and private transport costs.
Headline CPI has been falling on an annual basis since Nov 2014, hit by lower global oil prices as well as falls in housing rents and private transport costs.PHOTO: ST FILE

SINGAPORE - Singapore's record run of falling inflation may be coming to an end.

The Monetary Authority of Singapore (MAS) said on Monday (July 25) that the headline inflation measure - the all-items Consumer Price Index - "has likely troughed in the second quarter and is projected to rise in the coming months".

For the year as a whole, MAS kept its CPI-all items inflation at -1 per cent to 0 per cent. Housing rentals will continue to dampen overall inflationary pressures as a large supply of residential units is expected to come on-stream this year, MAS noted.

 

MAS said core inflation - which strips out the prices of cars and accommodation - is expected to pick up gradually over the course of the year as the disinflationary effects of oil as well as budgetary and other one-off measures ease.

 

But the pace of increase in core inflation "will be restrained by the weak external price outlook, subdued economic growth prospects, and the reduction in labour market tightness".

For 2016, MAS said core inflation is likely to average around 1 per cent.

MAS' statement came along with figures that showed the fall in the headline CPI moderated in June and core inflation continued its steady rise.

The all-items CPI declined 0.7 per cent year-on-year, moderating from the 1.6 per cent fall in May, when the Government gave rebates on service and conservancy charges to households, according a report from the Department of Statistics Singapore.

June's decline was also less than the 1.1 per cent decrease expected by economists in a Reuters poll.

Still, the drop in June extends a record run of consecutive year-on-year declines in headline CPI to 20 months - the longest streak since Singapore's independence in 1965.

Headline CPI has been falling on an annual basis since November 2014, hit by lower global oil prices as well as falls in housing rents and private transport costs.

Core CPI in June rose 1.1 per cent from a year earlier, reflecting a pickup in services inflation.

It was slightly more than the 1.0 per cent expected by analysts and up from May's 1.0 per cent pace, which was the fastest since core CPI rose by a similar 1.0 per cent in March 2015.