Consumer price index up, but at slower pace of 0.5%

Singapore's overall inflation rose 0.5 per cent last month from June last year, slowing significantly from the 1.4 per cent year-on-year increase seen in May, according to figures from the Department of Statistics yesterday.

This was due in part to the timing of the disbursement of service and conservancy charge rebates, which dragged down the cost of housing maintenance and repairs.

But there was also a slowing in private road transport inflation to 3 per cent in June this year from 6.1 per cent the month before, mainly due to a fall in car prices and smaller petrol price increases.

The Singapore central bank's core inflation measure - which excludes price changes for cars and accommodation, which are influenced more by government policies - rose 1.5 per cent last month, slightly lower than the 1.6 per cent increase in May, due to lower services and food inflation.

Food inflation eased to 1.4 per cent last month from 1.5 per cent in May, as the rate of increase in the prices of non-cooked food items moderated. Meanwhile, the prices of prepared meals continued to rise at a stable pace.

Services inflation edged down to 1.3 per cent last month from 1.4 per cent in May, due to a decline in telecommunication services fees.

Last month's data makes it the seventh straight month of steadily rising consumer prices. Economists said the steadily rising inflation numbers are unlikely to shift the central bank's neutral monetary policy stance.

For the first half-year, headline inflation rose 0.7 per cent, while core inflation was up by 1.4 per cent.

By household income groups, headline inflation for the lowest 20 per cent income group fell marginally by 0.1 per cent in the first half of the year, compared with the same period a year ago. For the middle 60 per cent and highest 20 per cent income groups, inflation rose by 0.6 per cent and 1 per cent respectively over the same period.

During the first half of the year, all three income groups experienced higher food and petrol prices, as well as tuition and other fees.

Healthcare service costs, road tax, electricity tariffs and parking fees also increased from the same period a year ago.

However, accommodation costs as well as bus and train fares fell for all three income groups.

The Monetary Authority of Singapore and Ministry of Trade and Industry said yesterday they are maintaining their forecast for core inflation to come in at 1 per cent to 2 per cent this year, and for headline inflation to be between 0.5 per cent and 1.5 per cent.

They said the projected pickup in inflation is not so much due to demand-induced price pressures, but more because of a rise in energy prices and the impact of administrative price increases, such as the rise in water tariffs and service and conservancy charges.

U-Save rebates, which have also been increased and will partially offset the impact of higher water prices, are not taken into account in the consumer price index.

United Overseas Bank economist Francis Tan wrote in a note: "This shows that the central bank is not expecting runaway prices and that although current economic conditions are better than just a year ago, the weakness in the labour market will set a limit on cost-pushed inflation."

Therefore, he added, MAS will likely maintain its neutral policy stance on the Singapore dollar.

A version of this article appeared in the print edition of The Straits Times on July 25, 2017, with the headline 'Consumer price index up, but at slower pace of 0.5%'. Print Edition | Subscribe