Core inflation stable in May at 1.3% but overall consumer prices pick up pace with 0.9% rise

The all-items inflation figure was higher than the expectations of analysts polled, but core inflation came in just as they expected.
The all-items inflation figure was higher than the expectations of analysts polled, but core inflation came in just as they expected.PHOTO: ST FILE

SINGAPORE - Core inflation remained stable in May, as higher retail and food inflation offset a steeper decline in the prices of electricity and gas, according to data released on Monday (June 24).

Core inflation - which strips out private road transport and accommodation costs - came in at 1.3 per cent year on year in May, unchanged from the figures in April.

However, overall consumer prices rose slightly to 0.9 per cent in May, from 0.8 per cent in April. This was due to upward pressures from the non-core components of the consumer price index such as accommodation and private road transport costs, said the Ministry of Trade and Industry (MTI) and the Monetary Authority of Singapore (MAS) in a joint statement on Monday.

The all-items inflation figure was higher than the expectations of analysts polled by Bloomberg, who expected overall inflation to ease to 0.6 per cent in May. But core inflation came in just as they expected.

Accommodation costs fell by 1 per cent in May, a more moderate pace compared with the 1.4 per cent drop in April. This reflected a slower pace of decline in housing rentals, as well as a stronger pickup in the cost of housing maintenance and repairs, MAS and MTI said.

The cost of electricity and gas also fell, by 4 per cent in May, steeper than the 2.8 per cent drop in the preceding month, due to the dampening effect of the phased nationwide launch of the Open Electricity Market on electricity prices.

However, the cost of private road transport rose by 1.5 per cent last month, higher than the 1.1 per cent increase in April, mainly on account of a steeper rise in car prices which more than offset a smaller increase in petrol prices.

 
 
 
 

The overall cost of retail items also recorded a larger 0.5 per cent year on year increase in May, compared with the 0.2 per cent rise in April. "This mostly reflected an upturn in the prices of personal effects, as well as smaller declines in the costs of recreation and entertainment goods, clothing and footwear and medical products, appliances and equipment," MAS and MTI said.

Food inflation came in at 1.4 per cent in May, slightly higher than the 1.3 per cent in the previous month, largely due to a faster pace of increase in the prices of prepared meals.

Services inflation was 2 per cent in May, unchanged from April, as a stronger pickup in holiday expenses was offset by a larger decline in the cost of telecommunication services fees as well as smaller increases in airfares and recreational and cultural services fees.

MAS and MTI noted that external sources of inflation are likely to be benign for the rest of the year.

"Global oil prices for the full year are currently not expected to exceed last year's average. Global food prices should also only pick up slightly on average."

They added that on the domestic front, labour market conditions have remained firm and will support moderate wage increases, such that unit labour costs should continue to rise. "However, an acceleration in inflationary pressures is unlikely against the backdrop of slower GDP growth, uncertainties in the global economy, as well as the continuing restraining effects of MAS' monetary policy tightening in 2018," they said.

Core inflation is expected to come in near the mid-point of the forecast range of 1 to 2 per cent in 2019. Meanwhile, overall inflation is expected to average 0.5 to 1.5 per cent in this year.