Singapore core inflation eases more than expected to 2.5% in July, lowest in over two years
Sign up now: Get ST's newsletters delivered to your inbox
Core inflation in Singapore cooled more than expected in July with slower price increases recorded across the board.
PHOTO: ST FILE
Follow topic:
SINGAPORE - Core inflation in Singapore cooled more than expected in July, with slower price increases recorded across the board.
Core inflation, which strips out private transport and accommodation costs to better reflect the expenses of households, fell to 2.5 per cent year on year in July, beating analysts’ expectations of 2.9 per cent.
This is the lowest since February 2022, when it was 2.2 per cent. It is also the second straight month of easing after June’s 2.9 per cent.
Overall or headline inflation in July was unchanged from June, at 2.4 per cent, led by a slowdown in accommodation costs. The figure also beats analysts’ projection of 2.5 per cent.
On a month-on-month basis, which represents how much momentum there still is in prices, core inflation dipped 0.1 per cent, while overall inflation fell by 0.3 per cent.
For the whole of 2024, core inflation will average 2.5 per cent to 3.5 per cent while overall inflation should range between 2 per cent and 3 per cent, the Ministry of Trade and Industry and the Monetary Authority of Singapore (MAS) said in their inflation report on Aug 23.
Their projections were unchanged from what MAS announced on July 26, when it trimmed its forecast for 2024 overall inflation to 2 per cent to 3 per cent,
“All in, MAS core inflation is expected to stay on a gradual moderating trend over the rest of the quarter and step down further in Q4 2024,” they said.
They added that private transport inflation is expected to moderate from 2023 amid the larger projected certificate of entitlement (COE) supply in 2024, while prices of accommodation should also continue to ease as the supply of housing units available for rental increases over the course of the year.
DBS Bank economist Chua Han Teng expects average core inflation in 2024 to fall compared with 2023. He cited contained imported price pressures, still well-behaved global commodity prices that are tempered by the Singapore dollar’s strength, as well as easing domestic business costs which are passed on to consumers.
“Given the significant downside surprise in July, core inflation may return to around 2 per cent sooner than anticipated,” Mr Chua added.
MAS does not have an explicit inflation target, though it has said that a core inflation rate of just under 2 per cent on average is consistent with overall price stability in the economy.
UOB said in a note that while prices have eased notably, concerns remain about the pickup in imported and external inflation in the recent months.
It said: “In the case of imported inflation, any reacceleration, particularly in the ‘food and live animals’ component, could hamper the progress of disinflation, given food has a significant weight of 21.1 per cent in the overall consumer prices basket.”
That said, UOB noted that the rate of cooling in July is “certainly helpful to support our view that MAS will ease (monetary) policy slightly in October”.
OCBC Bank chief economist Selena Ling said the overall disinflationary trajectory might “open up a potential monetary policy easing window in the months ahead”.
She noted that the key factors to monitor are the inflation trends in services, private transport and accommodation.
Of all spending categories, private transport was the only one to buck the trend in July, with costs rising 0.9 per cent year on year that month, compared with a fall of 0.7 per cent in June. This was due to smaller declines in the prices of cars and motorcycles, alongside a steeper increase in petrol prices.
Services inflation declined to 2.9 per cent, from 3.4 per cent in June, largely on the back of a slower pace of increase in holiday expenses. It came in below the 3 per cent level for the first time since May 2022.
Accommodation inflation edged down to 3.1 per cent from 3.3 per cent as housing rents rose at a more modest pace.
Food inflation dipped to 2.7 per cent in July from 2.8 per cent in June due to smaller hikes in the prices of both non-cooked food and food services.
Retail and other goods inflation eased slightly to 0.3 per cent from 0.5 per cent as the prices of clothing, non-durable household goods and personal effects fell.
Electricity and gas inflation also trended downward, to 6.6 per cent from 6.9 per cent, because of a smaller rise in electricity prices.
