Singapore's Dec inflation higher than analysts' projections

Food inflation remained at 1.4 per cent last month, unchanged from the previous two months. The price rises for non-cooked food items and prepared meals stayed broadly the same. For the whole of last year, overall consumer prices rose 0.4 per cent, l
Food inflation remained at 1.4 per cent last month, unchanged from the previous two months. The price rises for non-cooked food items and prepared meals stayed broadly the same. For the whole of last year, overall consumer prices rose 0.4 per cent, lower than the 0.6 per cent rise in 2017.ST FILE PHOTO

Rising costs for services and retail items, and smaller decline in accommodation costs

Singapore's headline - or overall - inflation climbed to 0.5 per cent last month compared with the same period in 2017, after falling to a six-month low of 0.3 per cent the month before.

The change reflects higher inflation for services and retail items, as well as a smaller decline in accommodation costs, said the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) yesterday.

Core inflation, which strips out accommodation and private transport costs, edged up last month as well.

It rose to 1.9 per cent year on year, up from 1.7 per cent in November last year, mainly owing to bigger increases in the costs of services and retail items.

Both figures are slightly higher than expected, with a Bloomberg poll of analysts tipping overall inflation to be 0.3 per cent and core inflation, 1.8 per cent.

But for the whole of last year, overall consumer prices rose 0.4 per cent - lower than the 0.6 per cent rise in 2017. Core inflation for the year went up to 1.7 per cent, from 1.5 per cent in the previous year.

For this year, MAS and MTI expect core inflation to be in the forecast range of 1.5 per cent to 2.5 per cent.

As for headline inflation, they expect it to pick up to 1 per cent to 2 per cent, as the overall drag from accommodation and private road transport costs lessens.

Last month, costs in most sectors rose except for private road transport which fell by 3.7 per cent, and accommodation costs, which slipped 1.9 per cent - moderating from a 2.1 per cent decline in November, owing to a more gradual decline in home rentals.

 
 
 

Services inflation went up to 1.5 per cent, from 1.2 per cent in November, owing to a stronger pick-up in holiday expenses and airfares.

Another contributing factor was a smaller decline in telecommunication service fees.

The overall cost of retail items rose 1.7 per cent last month as well, mainly because of bigger increases in the prices of clothing and footwear, as well as household durables.

The cost of electricity and gas rose by 14.6 per cent year on year, lower than the 15.4 per cent rise in November, owing to the effect of the phased nationwide launch of the Open Electricity Market on prices.

Meanwhile, food inflation remained at 1.4 per cent last month, unchanged from the previous two months. The reason: Price rises for non-cooked food items and prepared meals stayed broadly the same.

UOB economist Barnabas Gan called the components contributing to the stronger inflation climate last month "expectedly familiar", with housing and utilities costs steepening for the eighth consecutive month and education seeing its fastest growth figure since June 2017.

OCBC Bank's head of treasury research and strategy Selena Ling is "more concerned about food inflation and tight labour markets, which may pressure businesses to pass on costs to the consumers".

She added: "If core inflation crosses 2 per cent year on year and stays above 2 per cent for some months, this may prompt the MAS to consider a third monetary policy tightening this year."

A version of this article appeared in the print edition of The Straits Times on January 24, 2019, with the headline 'S'pore's Dec inflation higher than analysts' projections'. Print Edition | Subscribe