March core inflation falls to minus 0.2% amid coronavirus woes
Experts foresee period of deflation as circuit breaker measures dampen retail spending
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Lau Pa Sat food centre earlier this month. UOB economist Barnabas Gan said Singapore will likely see a period of deflation with domestic prices dragged down by cheaper oil and declining consumer demand, worsened by a weak labour market and Covid-19 measures that deter retail spending.
PHOTO: AGENCE FRANCE-PRESSE
Inflation was down again last month - a trend that is likely to continue for some time as the pandemic takes a toll on the global economy.
Core inflation - which excludes accommodation and private road transport costs - fell to minus 0.2 per cent in March from the same month last year, on the back of a steeper decline in the cost of services. That followed the decline to minus 0.1 per cent on a year-on-year basis in February.
The "negative" numbers mean the costs of many products and services fell in both months.
Overall inflation was down as well. It fell from 0.3 per cent in February - at the time its lowest point since January 2018 - to 0 per cent last month.
The forecast for headline and core inflation remains unchanged at between minus 1 per cent and 0 per cent for this year, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) said yesterday.
OCBC head of treasury research and strategy Selena Ling noted: "With an imminent global recession on the cards, external inflation sources will likely remain benign amid soft global demand in the quarters ahead."
She added that extending the circuit breaker measures until June 1 and tighter rules delineating essential services are likely to hit business confidence and dampen consumer spending.
"The cooling of domestic economic activities for April to May and the emergence of slack capacity, whether in manufacturing, services and construction, would imply that domestic cost pressures continue to head south in the coming months," Ms Ling added.
UOB economist Barnabas Gan said Singapore will likely embark on a period of deflation with domestic prices dragged down by cheaper oil and declining consumer demand.
This would be exacerbated by a weaker domestic labour market and Covid-19 measures that deter retail spending.
"Falling tourism spending in Singapore's tourist-oriented industries may also lead to sharp reductions in aviation and tourism activities as long as global travel restrictions stay in place," he added.
Mr Ong Sin Beng, executive director of emerging markets Asia, economic and policy research at JP Morgan, said inflation is likely to continue its decline through the first half of the year before stabilising in the second half.
Last month's low inflation numbers were underpinned by the overall cost of services dipping to minus 0.7 per cent year on year, markedly steeper than the minus 0.4 per cent recorded in February.
Private transport inflation fell sharply to minus 0.3 per cent last month, compared with February's 2.4 per cent, due to a fall in petrol prices and parking fees as well as a smaller increase in the price of cars.
Food inflation edged down to 1.5 per cent, while electricity and gas prices fell at a slower pace, to minus 6.2 per cent last month.
Oil prices should stay low and weigh on the costs of energy-related components in coming quarters, noted the MAS and MTI.
Supply chain disruptions as a result of global measures to contain the Covid-19 outbreak could also put some upward pressure on imported food prices, they added.
