Singapore’s core inflation rate has seen a decline, reaching 3.4% in August, marking its lowest since April 2022. This decrease from July’s 3.8% was attributed to a reduction in inflation for services, food, and retail goods, as reported by the Ministry of Trade and Industry (MTI) and the Monetary Authority of Singapore (MAS) on Monday, Sep 25.
Historical Context
Earlier this year, core inflation had peaked at a 14-year high of 5.5% during January and February. However, it has been on a downward trend in the subsequent months. It’s essential to note that core inflation figures exclude the costs of accommodation and private transport.
Detailed Breakdown
- Overall Inflation: There was a slight decrease in the overall inflation, which stood at 4% year-on-year in August, a 0.1% drop from July.
- Food Inflation: August saw a decline in food inflation to 4.8%, attributed to a slower rise in the prices of prepared meals and non-cooked food.
- Electricity and Gas: Costs in this sector continued their decline, albeit at a slower pace, registering a -1.4%.
- Retail and Other Goods: A dip to 2% was observed due to smaller price hikes for household durables and a decrease in clothing and footwear prices.
- Services: The inflation rate for services was recorded at 3.1%, a result of smaller increases in various sectors, including holiday expenses and telecommunication services.
- Accommodation: The inflation rate in this sector eased to 4.4% year-on-year in August.
- Private Transport: A surge was observed in this sector, with inflation rising from 4.8% to 6.3% due to a steeper increase in car prices.
Outlook for the Future
MTI and MAS anticipate a further moderation in core inflation over the upcoming months, given the low imported costs compared to the previous year and an expected easing in the domestic labour market’s tightness.
For 2023, projections indicate that headline inflation will average between 4.5% and 5.5%, while core inflation is expected to hover between 3.5% and 4.5%.
Several factors contribute to these projections:
- Global Supply Chain: Frictions in the global supply chain have largely subsided, and food commodity prices are currently below the levels from the previous year.
- Domestic Factors: Domestically, unit labour costs are predicted to rise, albeit at a slower pace. The demand for cars remains robust, indicating that private transport inflation will likely increase in the near future. However, accommodation inflation is expected to continue its downward trend due to an increase in rental home supply.
MTI and MAS also highlighted potential risks, including unexpected shocks to global energy and food commodity prices and persistent tightness in the domestic labour market. Conversely, a sharper-than-anticipated global economic slowdown could lead to a more significant easing of inflationary pressures.
Also learn about Singapore’s Core Inflation Maintains 5% in April.
