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 last month, compared with 0.4 per cent in the previous month, data released yesterday showed.
On the other hand, core inflation - which strips out private transport and accommodation costs - showed a different 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 who were 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 ahead of the MAS biannual monetary policy review due next month. The MAS had tightened its monetary policy twice last year, but is expected to maintain its stance in the upcoming review, given the tame outlook for inflation.
Last month, the MTI and the MAS lowered the official full-year forecast for headline inflation to 0.5 per cent to 1.5 per cent, down from 1 per cent 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 last year.
But there are signs of a recovery, with petrol and car prices falling at a slower pace last month. This led private road transport costs to ease by 2.3 per cent year on year last month, a smaller decline than the 3.4 per cent dip 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, because of a smaller decrease in housing rentals and a larger increase in the cost of maintenance.
The MTI and the 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 last month, 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 rose by a smaller 1.5 per cent last month, from 1.7 per cent in January.
SIM Global Education senior lecturer Tan Khay Boon said food, healthcare and education costs will be the main concern for average households as the inflation indicators inch upwards. The statistics show that living cost pressure is beginning to build up, though not to alarming levels, he added.
Both the MTI and the MAS 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, they said.