Singapore consumer prices up for 2nd straight month

A view of Singapore's Central Business District from on high at Marina Bay Sands. Consumer prices are likely to be higher this year on average compared with last year, according to Maybank Kim Eng economists.
A view of Singapore's Central Business District from on high at Marina Bay Sands. Consumer prices are likely to be higher this year on average compared with last year, according to Maybank Kim Eng economists.ST PHOTO: DESMOND WEE

January's positive inflation due to rise in cost of oil-related items, higher services inflation

Singapore logged its second consecutive month of positive inflation in January, on the back of gradually recovering oil prices.

The consumer price index - the main measure of inflation - rose 0.6 per cent last month compared with the same month a year earlier, according to figures released yesterday by the Department of Statistics.

This came after a record two-year spell of negative inflation from November 2014 to October last year, and a reading of 0 per cent in November.

Inflation finally turned positive in December, with the index inching up 0.2 per cent.

Lower oil and car prices and falling accommodation costs - partly due to the soft property market - were the main drivers behind that long bout of negative inflation.

January's uptick in consumer prices was due in part to an increase in the cost of oil-related items - including electricity and petrol - as well as higher services inflation.

Overall inflation is projected to pick up to 0.5 to 1.5 per cent this year, from negative 0.5 per cent in 2016. This largely reflects higher prices of energy-related components as well as some administrative price increases.

The cost of oil-related items rose 5.9 per cent, following a 0.1 per cent decline in December, reflecting an increase in electricity tariffs as well as a stronger pickup in petrol prices.

Meanwhile, services inflation rose to 1.9 per cent in January from 1.6 per cent a month earlier. This was largely due to higher air fares and telecommunication services.

These increases pushed up core inflation - which strips out accommodation and private road transport costs to better gauge everyday expenses. It came in at 1.5 per cent last month, up slightly from December's 1.2 per cent.

Core inflation is expected to average 1 to 2 per cent this year, compared with 0.9 per cent in 2016, according to estimates from the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI).

Overall inflation is projected to pick up to 0.5 to 1.5 per cent this year, from negative 0.5 per cent in 2016. This largely reflects higher prices of energy-related components as well as some administrative price increases, MAS and MTI said. They added that overall cost pressures should "remain muted" as the slowing economy is still weighing on the labour market and wage growth.

Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye said consumer prices are likely to be higher this year on average compared with last year.

The water price hike announced in Budget 2017, as well as higher service and conservancy charges, will contribute to this.

"Higher commodity prices - both oil and food - would also likely continue to feed into consumer prices this year," they added.

A version of this article appeared in the print edition of The Straits Times on February 24, 2017, with the headline 'S'pore consumer prices up for 2nd straight month'. Print Edition | Subscribe