Singapore core inflation eases to 0.7% in September, the lowest in over three years

Overall inflation in Singapore remained the same at 0.5 per cent in September. The cost of retail goods declined, easing 0.8 per cent.
Overall inflation in Singapore remained the same at 0.5 per cent in September. The cost of retail goods declined, easing 0.8 per cent.ST PHOTO: KELVIN CHNG

SINGAPORE - Core inflation in September eased to 0.7 per cent, the lowest since March 2016 when it fell to 0.6 per cent, according to data released on Wednesday (Oct 23).

Last month's core inflation reading was also slightly down from August's 0.8 per cent, and came on the back of lower services inflation and a larger fall in the cost of electricity and gas, even as the cost of retail goods fell by a smaller amount.

Core inflation excludes the costs of accommodation and private road transport, which are more affected by government policy and are not considered part of Singaporeans' everyday expenses.

Headline or overall inflation remained the same at 0.5 per cent in September, as accommodation costs fell by a smaller amount, while core and private road transport inflation slowed.

The figures were in line with predictions made by analysts in a Bloomberg poll, who flagged headline inflation at 0.5 per cent and core inflation at 0.8 per cent, the same as the inflation rates in August.

Services inflation eased to 1.4 per cent year on year last month, from 1.7 per cent in August.

This was on the back of a fall in airfares and telecommunications services fees, which more than offset larger increases in recreational and cultural services fees and holiday expenses, noted the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI).

Food inflation was 1.6 per cent in September, unchanged from the preceding month, as a slower pace of increase in the cost of non-cooked food offset a marginally faster pace of increase in the prices of prepared meals.

The cost of electricity and gas fell by a steeper 8.3 per cent year on year in September, compared with the 7.8 per cent decline in August, mainly due to the dampening effect of the nationwide launch of the Open Electricity Market on electricity prices.

 
 
 

The cost of retail goods also declined, easing 0.8 per cent.

"(This) primarily reflected smaller declines in the prices of clothing and footwear items, medical products and telecommunications equipment," MAS and MTI said.

Private road transport inflation was 0.5 per cent in September, lower than the 0.6 per cent in August. This was due to a larger fall in petrol prices and a smaller increase in Electronic Road Pricing charges, which collectively outweighed a faster pace of increase in car prices, MAS and MTI noted.

Accommodation costs dipped by 0.5 per cent, moderating from the 0.7 per cent drop in August, as housing rentals declined more gradually.

MAS earlier this month lowered slightly the Singdollar appreciation rate and also narrowed downwards its inflation forecasts. Noting that core inflation had come in lower than anticipated in recent months and will remain subdued in the year ahead, it forecast core inflation to come in at the lower end of the 1 to 2 per cent forecast range for 2019, and average 0.5 to 1.5 per cent in 2020.

It also narrowed its projection for 2019 headline inflation to 0.5 per cent, from the previous forecast range of 0.5 to 1.5 per cent. For 2020, it said headline inflation is expected to average 0.5 to 1.5 per cent.

On Wednesday, MAS and MTI kept to those forecasts, saying that in the quarters ahead, external sources of inflation are likely to remain benign, amid weak demand conditions and generally well-supplied food and oil commodity markets. However, they noted that oil prices could be volatile in the near term, reflecting geopolitical risks.

"On the domestic front, labour market conditions are softening slightly. This would lower wage growth in 2019 and 2020, compared with last year. At the same time, non-labour costs such as retail rents should stay subdued, and any cost pass-through to consumers would be constrained by the weaker economic environment," they added.