Inflation accelerates as transport cost rises to nine-month high

Higher COE premiums and petrol pump prices were the main culprits.

Here's an in-depth summary of the September 2012 CPI from Maybank Kim Eng:

Inflation rate reversed its slowing trend between June 2012 and Aug 2012 as it accelerated to +4.7% YoY in Sep 2012 (Aug 2012: +3.9% YoY: Consensus +4.3% YoY). Core inflation rate (ex-accommodation and private road transport) also picked up to +2.4% YoY (Aug 2012: +2.2% YoY). MoM, consumer prices gained by +0.6%, the same as in Aug 2012. On a quarterly basis, headline inflation moderated to +4.2% YoY in 3Q 2012 from the +5.2% YoY in 2Q 2012. YTD inflation rate was 4.8% (Jan-Sep 2011: +5.1%). Our 2012 and 2013 headline CPI forecasts are +4.3% and +4% respectively (2011: +5.2%).

Mainly on the resurgence “Transport” cost which rose to a nine-month high of +9.6% YoY (Aug 2012: +6.0% YoY), primarily due to the “Private Road Transport” component which gained by +10.8% YoY (Aug 2012: +6.2% YoY) amid higher COE premiums and petrol pump prices. “Housing” remained a significant contributor to inflation for the month as it advanced by +6.4% YoY (Aug 2012: +6.1% YoY) on rising cost of “Accommodation” (Sep 2012: +7.7% YoY; Aug 2012: +7.4% YoY) as leasing contracts for residential properties continued to be reset at higher rental values, which further pushed up both actual rental accommodation cost and imputed rentals on owner-occupied accommodation. In addition, several town councils raised Service and Conservancy Charges (S&CC) last month. In contrast, the “Food” sub-index which was the third biggest contributor to headline inflation rate last month slowed to +2.1% YoY (Aug 2012: +2.3% YoY) due to slower rise in the prices of “Sea Food” (Sep 2012: +2.9% YoY; Aug 2012: +5.5% YoY) and “Rice & Other Cereals” (Sep 2012: +0.7% YoY; Aug 2012: +1.3% YoY).

MAS-MTI expects inflation to remain elevated in 4Q12 and 1Q13, in justification of the recent no change in monetary policy. This is attributed to higher imputed rentals on owner-occupied accommodation and elevated car prices even as imported inflation is expected to be generally benign. Consequently, actual 2012 headline inflation rate may come in slightly above the official forecast of +4.5%, but is expected to moderate in 2013 to between +3.5 to +4.5%. For both years, accommodation and private road transport costs is expected to account for around 60% of headline inflation, while prices of commodity-related items and services will each contribute around one-fifth. Core-inflation is expected to be broadly stable even as there is a possibility that food prices could face upward pressure with weather related supply disruptions over the next few months. MAS forecasts that core inflation will average +2.5% in 2012 and between +2 and +3% in 2013.