Core inflation rises to 0.7% in December, eases to 1% for whole of 2019

Services inflation picked up to 1.3 per cent in December compared with a year before, which was a drop from 1.1 per cent in the preceding month. PHOTO: ST FILE

SINGAPORE - Core inflation last year came in at 1 per cent, much lower than the 1.7 per cent recorded in 2018, and at the bottom end of the Government's forecast range.

For December alone, core inflation rose to 0.7 per cent on a year-on-year basis, from 0.6 per cent in November, on the back of higher services inflation, according to consumer price data released in Thursday (Jan 23).

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 also picked up, to 0.8 per cent, in December compared with a year before, from 0.6 per cent in November. This was largely on account of an increase in private road transport and services inflation.

For the whole of 2019, overall inflation rose to 0.6 per cent from 0.4 per cent the year before.

The monthly inflation figures came in slightly higher than the expectations of analysts polled by Bloomberg, who projected core inflation to ease to 0.5 per cent and overall inflation to hit 0.7 per cent.

For December, private road transport costs rose by 3.1 per cent year on year, up from the 2.3 per cent increase in the previous month. This was mostly due to a larger increase in petrol prices, which outweighed the smaller increases in the prices of cars and motorcycles and scooters, noted the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI).

Services inflation picked up to 1.3 per cent in December compared with a year before, which was a drop from 1.1 per cent in the preceding month, on the back of a larger increase in telecommunication services fees, education services fees and higher airfares.

Food inflation edged up to 1.8 per cent, from 1.7 per cent in November, due to a faster pace of increase in the prices of non-cooked food and prepared meals.

However, accommodation costs decreased by 0.1 per cent, easing from the 0.2 per cent drop in November, as housing rentals declined more gradually.

The cost of electricity and gas declined by 11.4 per cent in December, extending the 11.8 per cent drop in the previous month, as the Open Electricity Market (OEM) continued to have a dampening effect on electricity prices, the authorities noted.

The cost of retail goods fell by 0.7 per cent in December, steeper than the 0.5 per cent fall in November.

"This was because the costs of recreation and entertainment goods, and clothing and footwear, registered larger declines, negating the rise in the prices of personal care products," MAS and MTI said.

They added 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, oil prices could be volatile in the near term, reflecting geopolitical risks," they said.

"On the domestic front, labour market conditions are softening slightly, which would lower wage growth in 2019 and 2020 compared to 2018. 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 subdued economic environment."

MAS and MTI kept to their inflation forecasts for 2020, with both core and overall inflation expected to come in within the range of 0.5 to 1.5 per cent.

Join ST's Telegram channel and get the latest breaking news delivered to you.