Core inflation stays negative for fifth straight month
But drop in overall consumer prices slows as food inflation edges up
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Food inflation hit 2.3 per cent last month, from May's 2.2 per cent, due to a larger increase in the prices of non-cooked items. One analyst said this was driven by global supply chain disruptions due to travel curbs worldwide and the stalling of the airline sector.
PHOTO: LIANHE ZAOBAO
Pricier food due to supply chain disruptions offset a plunge in the cost of services to help keep core inflation unchanged last month.
Core inflation - it excludes accommodation and private road transport costs - came in at minus 0.2 per cent, the same as May and the fifth straight month in negative territory.
Overall inflation eased to minus 0.5 per cent last month, from minus 0.8 per cent in May, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) noted yesterday.
Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye said it is still not clear if inflation has bottomed out.
"Travel and hotel rates will likely show a larger-than-average drop, given strict border controls and the collapse in tourism. Promotional auto discounts might show up (with) lower car prices in July," they noted.
"Wage cuts, job lossesa and border restrictions will likely keep services inflation in negative territory in the third quarter."
OCBC Bank head of treasury research and strategy Selena Ling also does not expect inflation to be positive before the end of the year, saying: "Energy prices remain contained and the softening domestic labour market is likely to weigh on private consumption."
Private transport costs fell 4.4 per cent last month, against the 6.8 per cent drop in May, due to smaller declines in car and petrol prices.
The cost of retail and other goods also recorded a smaller decline - negative 1.8 per cent last month compared with minus 2.3 per cent in May.
The cost of electricity and gas fell at a slower rate, as well as the take-up of new subscriptions under the Open Electricity Market.
But food inflation edged up, hitting 2.3 per cent last month from May's 2.2 per cent due to a larger increase in the prices of non-cooked items.
Ms Ling said: "A big driver of food inflation was the global supply chain disruptions due to travel restrictions globally and the stalling of the airline industry - no passenger flights also hit cargo shipments.
"With the gradual reopening of many economies and the cautious resumption of flights, the situation should steadily improve, although social distancing and hygiene measures could levy a higher cost (though this is not limited to the food industry per se)."
Accommodation inflation was unchanged as housing rents increased at a steady pace.
However, services costs fell more sharply - minus 1 per cent last month, from minus 0.8 per cent in May - due to larger declines in holiday expenses and airfares.
MAS and MTI noted that external sources of inflation are likely to remain benign in the months ahead amid weak global demand. Oil prices should also stay low for an extended period, which in turn will weigh on the prices of energy-related components.
The subdued economy and weak labour market here will dampen consumer demand, they added.
Both core and overall inflation are forecast to average between minus 1 and 0 per cent this year.
United Overseas Bank economist Barnabas Gan said that the mix of falling domestic and tourism-led demand, as well as low oil prices for the rest of 2020, will form "formidable headwinds against consumer prices".
He added that anecdotal evidence pointing to a resurgence in Covid-19 in some of Singapore's key trading partners and the tightening of social restrictions in some parts of Asia could also suggest that any return of inbound tourism may not happen for the foreseeable future.
