Headline inflation flat at 0.7% in October

The pace of price hikes eased in several consumer categories. Food, prices, for example, were up 1.4 per cent on October last year, slightly gentler than September's 1.6 per cent increase.
The pace of price hikes eased in several consumer categories. Food, prices, for example, were up 1.4 per cent on October last year, slightly gentler than September's 1.6 per cent increase.ST PHOTO: LIM YAOHUI

Lower private transport costs offset pricier gas and electricity; core inflation rises to 1.9%

Headline inflation was unchanged last month from September as private road transport costs again declined, although pricier electricity and gas are still putting the squeeze on consumers.

The consumer price index, which measures cost rises for all items, rose 0.7 per cent in October over the same month last year - the same pace of increase since August this year.

This was a hair's breadth beneath the 0.8 per cent forecast in a Bloomberg survey of economists.

But core inflation, which strips out housing and private transport costs, rose marginally as the private watchers had predicted, from 1.8 per cent in September to 1.9 per cent last month, according to the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) yesterday.

Rising electricity and gas prices had a hand in driving up inflation.

Costs rose 16.6 per cent year on year, accelerating from 13 per cent in September, due to higher electricity tariffs amid costlier oil.

But the pace of price hikes of other consumer categories eased.

 
 

Food prices were up 1.4 per cent on October last year, slightly gentler than September's 1.6 per cent increase.

Retail item prices rose 1.3 per cent last month, down from the 1.5 per cent growth in September.

This was due to inflation cooling for clothing and footwear and medical products, as well as personal effects such as handbags, wallets and watches.

Meanwhile, services inflation came in flat at 1.4 per cent as higher education fees and holiday expenses were balanced by a slower pace of increase in recreational and domestic services and airfares.

Private road transport costs continued to fall, and more sharply this time. Prices were down 0.6 per cent, against a 0.1 per cent dip in September as a tumble in car prices offset costlier petrol.

Housing costs fell 2.5 per cent, the same pace of decline as in September.

The MAS and the MTI reiterated that external sources of inflation have increased in recent quarters. Higher import and labour costs could be passed on to consumers, but "the extent of overall price increases will be capped by greater market competition in several consumer segments, such as telecommunications, electricity and retail".

The official inflation forecasts for this year and next year were unchanged. Headline inflation is estimated at 0.5 per cent this year, and between 1 and 2 per cent next year.

Core inflation has been projected to rise "modestly" in the coming months, at between 1.5 and 2 per cent this year, and between 1.5 and 2.5 per cent next year.

UOB economist Alvin Liew expects headline inflation to average 1.5 per cent and core inflation to come in at 2.2 per cent next year.

"The key downside risk to our inflation forecasts is global crude oil price, which has suffered heavy correction in recent weeks," he said.

This was a concern also flagged by ANZ Bank economist Khoon Goh: "Domestic demand-related price pressures from the improving labour market will keep core inflation at about the 2 per cent level over the early part of next year. (But) this will be offset to some extent by the recent declines in oil prices, if sustained."

The MAS tightened monetary policy last month, putting the Singdollar's rate of appreciation on a "modest and gradual appreciation path" for "medium-term price stability".

DBS economists Taimur Baig and Nathan Chow noted yesterday that the MAS "is, barring global shocks, likely to keep normalising monetary policy next year".

A version of this article appeared in the print edition of The Straits Times on November 24, 2018, with the headline 'Headline inflation flat at 0.7% in October'. Print Edition | Subscribe