Felicia Tan Published on Mon, Aug 23, 2021
Singapore’s headline and core inflation remained in the green, with both metrics up y-o-y in the month of July, according to figures released by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) on Aug 23.
MAS Core inflation, which measures price increments excluding the accommodation and private transport sectors, grew 1.0% y-o-y in July, from 0.6% in June, mainly driven by higher electricity & gas costs.
Headline inflation, or CPI-All items inflation, which measures total inflation in the economy, rose by 2.5% y-o-y in July.
The higher headline inflation was mainly attributable to the higher electricity & gas costs, higher accommodation and food inflation. The smaller decline in the cost of retail and other goods also contributed to the higher y-o-y increase in July.
Electricity & gas costs increased due to higher electricity and gas tariffs on the back of the hike in global oil prices from a low base in 2020. Due to higher energy import costs, the electricity tariff for households was raised to 25.02 cents per kilowatt hour (kWh) for 3Q2021, from 24.13 cents per kWh in the 2Q2021.
On a y-o-y basis, the electricity tariff rose by 19.3% in July, while the gas tariff was up by 12.9%.
Accommodation inflation was higher y-o-y driven by the larger increase in housing rents, while food inflation rose on the back of the inflation of higher non-cooked food.
The cost of retail & other goods fell at a slower pace due to the smaller decline in the price of clothing and footwear.
Meanwhile, inflation in the services and private transport sectors fell due to the decline in telecommunication fees and due to the smaller increase in car prices respectively.
On a month-on-month basis, core CPI rose by 0.2% in July, while CPI-All items fell by 0.2%.
On a cumulative basis from January to July, core CPI inched up by 0.5% y-o-y while headline inflation increased by 1.7% y-o-y.
Looking ahead, the continued uncertainty in Singapore could dampen increases in domestic prices in the near-term, say MAS and MTI.
In the meantime, wage increases may continue to remain “restrained”, while commercial rents are projected to stay low.
In comparison, private transport and accommodation costs should remain resilient on the back of firm demand.
To this end, MAS and MTI have estimated that core inflation is expected to average between 0-1% in 2021, while headline inflation is forecast to come in between 1-2% as base effects fade in the coming quarters.
Photo: Bloomberg