Inflation dip benefited lowest and highest income groups most

Shoppers perusing through products on the shelves of Mustafa Centre's supermarket.
Shoppers perusing through products on the shelves of Mustafa Centre's supermarket.PHOTO: ST FILE

Households in the lowest and highest income brackets benefited the most from lower inflation in the first half of this year, according to statistics released yesterday.

Those in the middle 60 per cent have also experienced lower inflation but to a smaller extent, the Statistics Department data showed.

The consumer price index declined 0.9 per cent over January to June compared with the corresponding period a year ago.

All income groups experienced declines in accommodation costs, electricity tariffs and car prices, although these were partially offset by costlier food.

The consumer price index for the lowest 20 per cent fell by 1.3 per cent, the largest decline across income groups.

This was primarily due to lower accommodation expenses, healthcare costs (taking into account various subsidies such as support for MediShield Life premiums) and electricity tariffs, which had a more significant impact as these items accounted for a higher share of this group's total expenditure.

Households in the highest 20 per cent income group experienced a 1.1 per cent decline in their consumer price index.

This was larger than the 0.7 per cent dip experienced by the middle 60 per cent, mainly because cars accounted for a larger share of expenditure for those in the higher income group, and car prices have been declining on the back of cheaper certificate of entitlement premiums.

CIMB Private Bank economist Song Seng Wun said targeted government measures, such as utility rebates and healthcare subsidies, "help ensure that overall inflation for the lower income group remains manageable".

However, he noted that food price inflation might continue inching upwards this year.

The food component of the consumer price index rose 2.1 per cent in the January to June period over a year ago.

"There is that worry that the weather could lead to supply disruptions... Some commodity indices have started to pick up," Mr Song added.

A version of this article appeared in the print edition of The Straits Times on July 26, 2016, with the headline 'Inflation dip benefited lowest and highest income groups most'. Print Edition | Subscribe