Low inflation benefited lowest income group most

Households in the lowest income bracket benefited the most from low inflation last year, according to statistics out yesterday.

Those in the middle 60 per cent and top 20 per cent experienced modest price rises.

Economists said the pace of price increases could pick up this year on the back of strengthening economic growth, though inflation is likely to remain modest on the whole.

The consumer price index - the main measure of inflation - rose 0.6 per cent last year, its first positive showing since 2014.

But it declined 0.1 per cent for households in the lowest 20 per cent income group - the third consecutive annual decline, according to Department of Statistics data.

This was due mainly to lower accommodation costs as well as bus and train fares.

Consumer prices for the middle 60 per cent went up 0.5 per cent last year, and rose 0.8 per cent for the top 20 per cent.

This was a result of higher food and petrol prices, tuition and other fees, healthcare services costs, electricity tariffs, parking fees, road tax, salaries for foreign domestic workers and water prices, the Statistics Department said.

While inflation ended the year on a muted note, economists said consumer prices are expected to rise at a slightly quicker pace this year on the back of strengthening economic growth.

Inflation came in at 0.4 per cent in December - below November's 0.6 per cent and marginally lower than economist estimates of a 0.5 per cent rise.

Core inflation - which strips out accommodation and private road transport costs - rose to 1.5 per cent for the whole of last year, from 0.9 per cent in 2016.

"We do not think that prices are going to 'run away higher' anytime soon in 2018," said United Overseas Bank economist Francis Tan.

"However, it is a fact that external demand has turned stronger and the improving domestic labour market condition will boost Singapore's core inflation to a higher range of 1 per cent to 2 per cent.

"This is up from a zero to 1 per cent range back in the 2015 to 2016 period."

Official forecasts tip inflation of between zero and 1 per cent this year - broadly similar to last year - despite stronger economic growth and higher oil prices.

A version of this article appeared in the print edition of The Straits Times on January 24, 2018, with the headline 'Low inflation benefited lowest income group most'. Print Edition | Subscribe