Singapore consumer prices fall for 10th straight month, by bigger-than-expected 0.8% drop in August

Shoppers browsing the shelves in a supermarket in Singapore.
Shoppers browsing the shelves in a supermarket in Singapore. PHOTO: BLOOMBERG

SINGAPORE - Singapore's consumer prices in August saw their biggest year-on-year fall in nearly six years and the tenth straight monthly decline, on the back of lower Certificate of Entitlement (COE) premiums for cars and falls in housing rentals.

Consumer prices slid 0.8 per cent in August from a year earlier - their biggest year-on-year drop since Nov 2009 and double the 0.4 per cent decline in July, according to figures from the Ministry of Trade and Industry (MTI) and the Monetary Authority of Singapore (MAS) on Wednesday (Sept 23).

The drop was also higher than the 0.5 per cent fall forecast in a Reuters poll of 12 economists.

MTI and MAS noted the effect of the high base a year ago when COE premiums for cars saw a sharp increase, as well as the one-year road tax rebates for petrol vehicles. This impacted private road transport costs which fell by 2.9 per cent in August following a 0.1 per cent fall in July.

Accommodation costs declined by 2.9 per cent, extending the 2.8 per cent drop in the previous month, as the housing rental market continued to soften.

Annual headline CPI has been falling since last November, pressured by a slide in global oil prices as well as declining housing rents and private road transport costs.

Some economists see an increasing chance of a technical recession and more monetary easing next month, after data last month showed Singapore's industrial production in July shrank more than expected from a year earlier. The Monetary Authority of Singapore (MAS) holds its next policy meeting in October.

The poll also projected the central bank's core inflation measure to rise 0.4 per cent from a year earlier, steady from July's pace.

Core inflation in August - the focus of MAS policy - which excludes changes in private road transport and accommodation costs - rose 0.2 per cent from a year earlier, off the 0.4 per cent estimate in the Reuters poll of economists. It was lower than the 0.4 per cent increase in July, reflecting lower services and retail goods inflation.

Services inflation edged down to 0.5 per cent in August compared to 0.6 per cent in July, largely on account of the smaller increase in the cost of public road transport.

The cost of retail items fell by 0.6 per cent, after coming in unchanged in July, mainly reflecting the decline in clothing & footwear prices.

Food inflation was 1.9 per cent, unchanged from the previous month. Price increases for both non-cooked food items and prepared meals were broadly stable.

MAS and MTI said that for 2015 as a whole, they expect core inflation and headline inflation to come in at the lower half of their forecast range of 0.5-1.5 per cent and -0.5-0.5 per cent respectively.