S'pore's overall inflation in Oct hits 3.2%, highest in over 8 years

Rising car prices, rents behind jump; core inflation also up, fuelled by food and services costs

Singapore's overall inflation rose to the highest in over eight years last month, helped by higher car prices and housing rents, while core inflation climbed to its highest in nearly three years.

Both benchmarks rose faster than economists had predicted.

Overall inflation jumped to 3.2 per cent on a year-on-year basis, up from 2.5 per cent in September.

It was the highest since March 2013 and beat the 2.8 per cent median estimate of analysts polled by Bloomberg.

The uptick reflected stronger private transport and rental costs, in addition to higher core inflation, said the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) yesterday.

Core inflation, which excludes accommodation and private road transport costs, climbed to 1.5 per cent last month from 1.2 per cent in September.

The increase was due to rising services and food prices, and a smaller decline in the cost of retail and other goods.

It outdid the 1.3 per cent median estimate of analysts whom Bloomberg surveyed.

The last time the core inflation rate was higher was in March 2019, when it hit 1.7 per cent.

Core inflation, which better captures the underlying trend in consumer prices, is the measure MAS monitors most closely in its review of Singapore's monetary policy.

MAS and MTI said that rising imported and labour costs, as well as a recovery in domestic economic activity, will support a steady increase in core inflation in the quarters ahead.

The cost of services rose more sharply last month - by 1.6 per cent compared with September's 1.2 per cent - mainly due to higher inflation of airfares and holiday expenses, with the easing of border restrictions and establishment of vaccinated travel lanes.

Food inflation edged up to 1.7 per cent, compared with 1.6 per cent in September, as non-cooked food prices rose at a faster pace while the inflation of prepared meals remained broadly unchanged.

The cost of retail and other goods dipped at a slower pace of 0.4 per cent last month, compared with the 1 per cent fall in September, due to a smaller decline in the prices of clothing, footwear and telecommunications equipment.

Private transport inflation rose to 14.3 per cent, from 10.8 per cent the previous month, on the back of a stronger increase in car prices.

Accommodation inflation also rose, to 2.5 per cent compared with 1.9 per cent in September, as it was lifted by a larger increase in housing rents.

However, electricity and gas costs increased at a slower pace of 7.8 per cent, compared with the 9.9 per cent rise in September, due to smaller increases in electricity and gas tariffs from a year ago.

MAS and MTI said global inflation has remained elevated and this is likely to persist for some time.

"Higher crude oil prices are supported by tight supply conditions, as well as strengthening demand. The supply-demand mismatch in various commodities and goods markets, and bottlenecks in global transportation are likely to continue in the near term," they said.

"On the domestic front, the labour market recovery is expected to become more entrenched with the easing of Covid-19 restrictions and a pickup in economic activity," said MAS and MTI, adding that wages have increased and are expected to rise at a steady pace as slack in the labour market dissipates.

Consumer demand is also likely to strengthen as the Covid-19 situation here stabilises, with the possibility of "greater pass-through of accumulating business costs to consumer prices", they added.

MAS and MTI maintained their inflation expectations.

For 2021 as a whole, core inflation is seen coming in near the upper end of the 0 per cent to 1 per cent forecast range and is projected to increase further to between 1 per cent and 2 per cent next year.

All-items inflation is forecast to come in around 2 per cent this year and average 1.5 per cent to 2.5 per cent next year.

A version of this article appeared in the print edition of The Straits Times on November 24, 2021, with the headline 'S'pore's overall inflation in Oct hits 3.2%, highest in over 8 years'. Subscribe