Inflation in February edges up to 0.5 per cent, slightly less than expected

Core inflation came in a tad lower at 1.5 per cent in February 2019, down from 1.7 per cent in January.
Core inflation came in a tad lower at 1.5 per cent in February 2019, down from 1.7 per cent in January.PHOTO: ST FILE

SINGAPORE - Smaller declines in private road transport and accommodation costs caused headline or overall inflation to go up slightly to 0.5 per cent year on year in February, up from 0.4 per cent in the previous month, data released on Monday (March 25) showed.

Core inflation - which strips out private transport and accommodation costs - showed a reverse picture and came in a tad lower at 1.5 per cent last month, down from 1.7 per cent in January.

Both indicators came in lower than expected, according to Bloomberg consensus forecasts from economists polled. They had expected headline inflation to come in at 0.6 per cent and core inflation at 1.7 per cent.

Despite the higher headline inflation figure, smaller price increases in electricity and gas, services and retail items led to an easing in core inflation, said the Ministry of Trade and Industry (MTI) and the Monetary Authority of Singapore (MAS) in a joint statement.

The February figures were released before the MAS' bi-annual monetary policy review due next month. MAS tightened its monetary policy twice last year, but is expected to stand pat on its stance in the upcoming review given the tame outlook for inflation.

Last month, MTI and MAS lowered the official full-year forecast for headline inflation to 0.5 to 1.5 per cent, down from 1 to 2 per cent previously. Core inflation was left unchanged.

The downgrade follows a predicted fall in global oil prices this year, with oversupply causing the sharp decline seen in the fourth quarter of last year.

However, there are signs of a recovery with petrol and car prices falling at a slower pace in February. This led private road transport costs to ease by 2.3 per cent year on year in February, a smaller decline than the 3.4 per cent in the preceding month.

Accommodation costs fell by 1.6 per cent year on year last month, down from the 1.9 per cent decline in January, due to a smaller decrease in housing rentals and a larger increase in the cost of maintenance.

MTI and MAS noted that the phased launch of the Open Electricity Market (OEM) has contributed to the slower pace of increase in electricity and gas costs. Prices grew by 5.5 per cent in February, down from the 6.5 per cent increase in the preceding month. On a month-on-month basis, the cost of electricity and gas declined by 0.7 per cent from January to February, owing to greater competition in the OEM space.

Food inflation came in at 1.4 per cent year on year, unchanged from January. Retail items saw a 1.1 per cent year-on-year price increase overall, slower than January's 1.4 per cent increase. The cost of services also rose by a smaller 1.5 per cent in February, from 1.7 per cent in January.

Both agencies noted that the stronger labour market conditions in the domestic economy should lead to wage growth and continuing price pressures.

However, these upward inflationary pressures will be capped by greater market competition in consumer segments such as telecommunications, electricity and retail, said the MTI and MAS.