Food, energy prices push core inflation here to 13-year high

Price increases in food and energy drove Singapore's core inflation to 4.8 per cent last month - a 13-year high.

Core inflation, which excludes costs of private transport and accommodation and reflects the expenses of households more accurately, is up from 4.4 per cent in June, marking its highest level since it touched 5.5 per cent in November 2008.

The rise reflects the higher electricity and gas tariffs for the third quarter due to higher fuel costs, said CIMB economist Song Seng Wun. He added that spot prices of commodities or cooking oil "have passed their peak".

The headline consumer price index (CPI) or overall inflation last month came in at 7 per cent - the highest in 14 years since it hit 7.5 per cent in June 2008.

It was 6.7 per cent in June.

The rise was led by increases in private transport and accommodation costs.

While there will be a small respite with the recent pullback in global commodity prices, underlying price pressures are likely to stay strong due to a tight labour market and strong nominal wage growth, said Oxford Economics' senior economist Alex Holmes.

He expects core inflation to pick up in the next few months to above 5 per cent.

Deputy Prime Minister Lawrence Wong last week said inflation is projected to peak in the next two to four months before easing. But he cautioned that the extent of the easing as well as where the new inflation rates will stabilise are big uncertainties.

Said Mr Holmes: "While inflation should peak in the fourth quarter, it is likely to come down slowly thereafter, with a fresh upward boost from the goods and services tax (GST) rise in January 2023."

That is when GST rises from 7 per cent to 8 per cent.

OCBC Bank's chief economist Selena Ling estimates that inflation "may peak only closer to October this year". She said the main worry for people is that the accelerating inflation could erode their purchasing power, unless wages grow more than nominal inflation rates.

"But in the first quarter, resident wage growth was 7.8 per cent year on year, suggesting that wages are adjusting to the higher inflationary environment, although it may be uneven across different industries or jobs," she added.

Data from the Monetary Authority of Singapore and Ministry of Trade and Industry released yesterday showed that food inflation came in at 6.1 per cent last month.

Electricity and gas inflation surged to 24 per cent last month on bigger increases in tariffs for both.

Accommodation inflation came in at 4.6 per cent due to a faster pace of increase in housing rents, while private transport costs rose by 22.2 per cent, led by a stronger pickup in car prices.

Services inflation crept up to 3.5 per cent as the costs of outpatient services, airfares and recreational and cultural services saw larger increases.