What is your personal inflation rate?

The Straits Times worked closely with OCBC Bank’s chief economist Selena Ling to come up with the simplified calculator* above. It gives an estimated perceived personal inflation rate, calculated from the consumer price index (CPI) of a selected basket of goods and services. The basket of goods and services, which excludes accommodation but includes private transport, is carefully picked to reflect the daily expenses of most Singaporean households.

The CPI measures the average price changes over time of a fixed basket of goods and services and is widely used as a measure of consumer price inflation.

Knowing your personal inflation rate helps you to see how your consumption pattern may affect how much you spend and, in turn, how much you save, said Ms Ling.

The CPI of goods measures how their prices have changed over time

A closer look at CPI figures shows the lower year-on-year headline inflation in October was due to a moderation in private transport costs and prices falling across broad categories like recreation, retail and other goods. Electricity and gas inflation also came in lower owing to smaller increases in tariffs. But food prices edged up.

Although inflation may have peaked and price increases have been small for some categories, cost pressures remain. The tight labour market and the upcoming goods and services tax (GST) increase could further affect prices.

On the upside, headline inflation should gradually subside in 2023 as supply chain disruptions ease and global demand begins to slow amid monetary policy tightening, Ms Ling explained.

Meanwhile, the core inflation rate, which excludes private transport and accommodation costs, eased from 5.3 per cent in September to 5.1 per cent in October.

For 2022 as a whole, the Singapore central bank expects headline inflation to average around 6 per cent and core inflation around 4 per cent.

In 2023, taking into account all factors, including the GST increase, headline inflation is projected at around 5.5 per cent to 6.5 per cent and core inflation at 3.5 per cent to 4.5 per cent.

Global inflation has been driven by a strong post-pandemic rebound, supply chain frictions, war-related disruptions and tight labour markets. Although demand conditions in major economies have softened, prices of energy and food commodities remain high, given ongoing supply constraints.

For Singapore, imported inflation, a strong recovery from the pandemic and a tight labour market are adding to price pressures, the central bank noted.

The Monetary Authority of Singapore has boosted its support for the Singapore dollar to fight inflation by tightening monetary policy five times since October 2021. Singapore uses the currency as the main monetary policy tool to cool import costs – the key contributor to inflation here. A stronger currency helps absorb some of the inflation that seeps in with imported goods and raw materials.

Even as Singapore grapples with rising prices, its inflation rate is relatively lower than most of the Group of Seven countries: Britain, Canada, Germany, Italy and the United States, except for France and Japan.

It is too early to say that the inflation battle is over, said Ms Ling. While much of the current situation is due to external factors, such as higher energy and food prices arising from the Russia-Ukraine war, domestic factors are expected to feature more strongly in 2023. Besides the 1 percentage point increase in the GST rate on Jan 1, 2023, other areas that could push prices higher for Singaporeans include salary raises amid the tight labour market, the expansion of the Progressive Wage Model to more sectors, public transport fare increases and high certificate of entitlement prices for vehicles.

While there could be some gradual disinflation in 2023 – or a temporary slowing of the pace of price inflation – Singapore is probably still far from a deflation story, added Ms Ling. “For the man on the street, there will be some modest reprieve on the inflation front, especially if wage growth remains healthy and the upcoming Budget continues to extend fiscal support for cost-of-living issues, but this is barring a deep global recession scenario,” she said.

See how your spending behaviour may have been affected this year.

The inflation-adjusted budget above is calculated based on the CPI for all items from January to October 2022.

Fret not, even if your personal inflation rate is higher than the headline inflation rate. The Singapore Government has implemented measures to mitigate cost-of-living pressures and provide support for households.

It announced at least two more rounds of support measures in June and October 2022, in addition to the Household Support Package in Budget 2022, to fully cover the effect of rising prices for lower-income and retiree households, on average.

For middle-income households, on average, the Government support provided will offset more than half of the inflation-driven increases in the cost of living this year.

The latest $1.5 billion package announced in October includes a Cost-of-Living special payment for 2.5 million eligible adult Singaporeans, additional Community Development Council vouchers for every Singaporean household, public transport subsidies and vouchers, as well as enhancements to the Education Ministry’s financial assistance schemes for primary to degree students in schools and publicly funded post-secondary education institutions.

These come on top of a separate cash payout announced in Budget 2022 to help cushion the impact of the upcoming GST increase, under the Assurance Package. The cash payouts and other schemes under the Assurance Package will be disbursed over five years from 2022 to 2026 and are meant to offset additional GST expenses for the majority of Singaporean households for at least five years and, for lower-income households, around 10 years.

The Government has also said that it will continue to monitor the situation closely and do its part to support Singaporeans through these challenging times.

The first tranche of cash payouts was disbursed to some 2.9 million adult Singaporeans in December.

Start with small steps like cutting back on certain items that have become more expensive. “For example, taking public transport instead of private transport may help you save money and is good for the environment,” said Ms Ling. “Small changes like eating or drinking at a coffee shop, rather than a cafe or restaurant, can also help. Or, you could look for a more generic brand rather than branded items when shopping for groceries or toiletries, and take advantage of shopping promotions.”

If you are more inclined to save money, you can consider investing your savings as deposit rates and bond yields have risen, added Ms Ling.

This could include recycling your savings into higher-yielding products like fixed deposits, Singapore Government Treasury bills or the Singapore Savings Bonds.

If you are servicing debt, whether for credit cards, mortgage or car loan instalments, check with your bank if you can refinance to get better interest rates.