Singapore’s core inflation climbs to 2.2% in August

SINGAPORE – Singapore’s core inflation rose in August, driven by higher inflation for services, retail and other goods, and food.

Core inflation – which excludes private transport and accommodation to better reflect household expenses – came in at 2.2 per cent, up from 2 per cent in July, according to the Singapore Department of Statistics on Sept 23.

The figure was in line with a median estimate in a Bloomberg poll.

Overall inflation increased to 2.3 per cent in August, from 2.2 per cent in July, as higher core inflation more than offset lower private transport inflation.

Private transport inflation slowed to 7.5 per cent in August, from 8 per cent in July, due to a smaller increase in car prices.

Zavier Wong, market analyst at trading platform etoro, said the easing in private transport inflation largely reflects certificate of entitlement “supply dynamics”.

“Nothing in the inflation print suggests that petrol became cheaper,” he noted.

“The next electricity tariff revision in October will be benchmarked against gas prices from early July to mid-September... Over that period, crude oil prices climbed from around US$70 a barrel to above US$100, as strikes on shipping in the Strait of Hormuz dashed hopes of an imminent reopening.

“This means households could face another increase in electricity tariffs in the fourth quarter.”

Meanwhile, accommodation inflation was unchanged at 0.8 per cent, with housing rents increasing in August at the same pace as in July.

Services inflation edged up to 2 per cent in August, from 1.7 per cent in July, as airfares and prices of point-to-point transport services climbed at a faster pace.

Retail and other goods inflation rose to 1.8 per cent in August, from 1.4 per cent in July, due to higher inflation in clothing and footwear and personal care products.

Food inflation crept up to 2.3 per cent in August, from 2.2 per cent in July, due to higher food services inflation, even as non-cooked food inflation moderated.

Electricity and gas prices inflation was unchanged at 8.7 per cent as electricity prices rose at a similar pace in August as in July.

“Elevated global energy prices have led to increases in Singapore’s electricity and gas tariffs and higher transportation fares,” the Monetary Authority of Singapore and Ministry of Trade and Industry said in a joint statement on Sept 23.

“Global oil prices remain high and volatile, while adverse weather conditions are expected to lower agricultural yields and raise Singapore’s imported food prices.

“As higher input costs pass through global supply chains, the prices of a wider range of Singapore’s imported goods and services are expected to pick up in the quarters ahead.”

Etoro’s Wong said the global energy shock is “moving beyond just utility bills”, and into the products and services that businesses are charging and consumers are paying for.

“That is much more difficult to reverse because tariffs can come back down once gas becomes cheaper, but a transport fare or restaurant menu price stays where it is until a business is confident it won’t need that buffer again,” he added.

“Where things stand, with the Strait of Hormuz still shut and crude oil near US$100 a barrel, it is unlikely for any business to be that confident.”

Edward Lee, chief economist and head of foreign exchange for ASEAN and South Asia at Standard Chartered Bank, said that while price pressures continued to simmer, economic growth was holding up despite the uncertainty.

He expects MAS to keep monetary policy unchanged in October, although he said it would be a close call.

“MAS has already progressively tightened twice, but risks have continued to move towards another ‘very slight’ tightening, in our view,” he added.