Atiqah Mokhtar Published on Fri, Jul 23, 2021
Singapore’s headline inflation came in at 2.4% y-o-y in June, according to Consumer Price Index (CPI) data released by the Department of Statistics (Singstat) on July 23.
This is unchanged from May, which also saw 2.4% y-o-y growth.
Core inflation – which gauges price increments to sectors other than accommodation and private transport – edged up 0.6% y-o-y, easing from 0.8% in May.
According to a joint statement by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) released on the same day, the headline inflation forecast for 2021 has been revised to between 1%-2%, compared to a range of 0.5%-1.5% projected previously.
MAS and MTI’s forecast for core inflation remains unchanged at 0%-1% for 2021.
On a m-o-m basis, core inflation fell by 0.2% in June, while headline inflation was unchanged.
The flat headline inflation is attributable to the drop in the price of retail & other goods, which offset higher private transport and accommodation prices.
Prices for retail & other goods fell 1.8% y-o-y in June, compared to a fall of 0.8% in May. This was underpinned by a steep 9% fall y-o-y for clothing & footwear.
Transport prices grew 11% y-o-y in June, predominantly driven by a 14.9% y-o-y increase for private transport due to a steeper increase in car prices. Public transport and other transport services saw prices grow 1.8% and 2.3% respectively on a y-o-y basis.
The cost for food grew 0.9% y-o-y in June, edging downwards marginally from the 1% in May on the back of lower non?cooked food inflation.
Accommodation prices grew 1.1% y-o-y in June, edging up from 0.9% in May, which MAS and MTI attribute to housing rents rising at a faster pace.
In contrast, electricity & gas prices continued to decline by 1.8% y-o-y in June, narrowing slightly from a decline of 1.9% in May. Take?up in the Open Electricity Market (OEM) rose at a slower pace, thereby reducing its dampening effect on electricity prices.
Services inflation remained flat at 1.4% in June on a y-o-y basis, as lower inflation for point?to?point transport services was broadly offset by higher inflation for tuition & other fees and recreational & cultural services.
Looking ahead, MAS and MTI view the upward pressure on global inflation should ease in the latter part of this year, with surplus oil production capacity expected to cap the extent of oil prices increase.
Surplus oil production capacity should cap the extent of oil price increases.
“While there is the risk that inflation could persist in some of Singapore’s major trading partners, this would be tempered by the continued negative output gaps in many of these economies, which should help to moderate Singapore’s overall import price inflation,” MAS and MTI remark.
Back home, core inflation is expected to continue to gradually increase in the coming quarters, though this may be tempered by the return to tightened Covid-19 measures under Phase 2 (Heightened Alert).
In addition, uncertainty in the economic outlook will “weigh on consumer sentiment and hence price increases in the near term”. Wage growth is expected to remain muted as the slack in the labour market will take time to be fully absorbed, while commercial rents are projected to stay low.
Meanwhile, MAS and MTI view that private transport and accommodation costs should remain resilient on the back of firm demand for cars and rental accommodation, although the pace of increase in private transport costs is likely to slow as base effects fade.
To that end, headline inflation is expected to ease in the latter part of the year.