Core inflation eases to 1.4% but overall price index rises to 0.6%

Electricity and gas prices rose 3.9 per cent compared with March last year, lower than the 5.5 per cent increase in February.
Electricity and gas prices rose 3.9 per cent compared with March last year, lower than the 5.5 per cent increase in February. PHOTO: ST FILE

Core inflation eased last month after smaller rises in the cost of retail items as well as electricity and gas more than offset higher services and food inflation, according to data released yesterday.

Core inflation, which strips out private transport and accommodation costs, eased to 1.4 per cent year on year, just under the 1.5 per cent recorded in February.

But overall inflation rose to 0.6 per cent compared with March last year, an uptick from the 0.5 per cent recorded in February.

Both figures came in lower than expected, with analysts polled by Bloomberg predicting 1.7 per cent for core inflation and 0.7 per cent for overall inflation.

The Ministry of Trade and Industry (MTI) and the Monetary Authority of Singapore (MAS) have revised the forecast for core inflation to 1 per cent to 2 per cent this year, down from 1.5 per cent to 2.5 per cent previously.

The revision reflects the fall in global oil prices late last year and a sharper-than-anticipated decline in electricity prices after the roll-out of the Open Electricity Market.

United Overseas Bank economist Barnabas Gan said: "We continue to hold on to our call for inflation to stay soft into the year ahead.

 
 

"Moreover, the relative slowdown in Singapore's gross domestic product (GDP) growth led by the global economic uncertainties and weaker external environment could give further headwinds to overall price increases into 2019."

Assistant finance professor Aurobindo Ghosh from the Lee Kong Chian School of Business at Singapore Management University agreed: "With a global slowdown expected by International Monetary Fund economists and possible resolution of trade talks, inflation is expected to be fairly soft in the near future."

The overall cost of retail items last month inched up 0.1 per cent year on year, lower than the 1.1 per cent increase in February.

This was due to slower rises in the prices of clothing, footwear and personal care products as well as cheaper household durables.

The effects of higher tobacco duties imposed in February last year also dissipated last month.

Electricity and gas prices rose 3.9 per cent compared with March last year, lower than the 5.5 per cent increase in February.

"This reflected the dampening effect of the phased nationwide launch of the Open Electricity Market on prices," the MAS and MTI said.

Food inflation came in at 1.6 per cent year on year last month, up from 1.4 per cent in February, due to a quicker increase in prices of prepared meals and non-cooked items.

Services inflation hit 1.7 per cent year on year from 1.5 per cent in February, mainly because of higher inflation for holiday expenses, coupled with a smaller decline in telecommunication services fees.

Private road transport costs dipped by 0.9 per cent, less than February's 2.3 per cent decrease, on account of a more gradual decline in car prices and pricier petrol following an earlier drop.

Accommodation costs also fell at a more moderate pace, down 1.4 per cent year on year last month compared with the 1.6 per cent drop in February as the decline in housing rents eased.

The MAS and MTI said: "In 2019, external sources of inflation are likely to be benign, as oil prices are expected to come in lower ... than in 2018, while food prices should only pick up slightly on average.

"On the domestic front, labour market conditions remain firm and will support moderate wage increases, such that unit labour costs should continue to rise."

A version of this article appeared in the print edition of The Straits Times on April 24, 2019, with the headline 'Core inflation eases to 1.4% but overall price index rises to 0.6%'. Print Edition | Subscribe