June CPI remains elevated at 2.4% YoY

MAS upgraded its 2021 official headline CPI from 0.5%-1.5% YoY to 1%-2% YoY.

Singapore’s June consumer price index (CPI) sustained its elevated pace at 2.4% year-on-year (YoY) according to statistics released by the government.

This is the sixth straight month where Singapore saw higher consumer prices compared to a year ago.

The Monetary Authority of Singapore (MAS) upgraded its 2021 official headline CPI from 0.5%-1.5% YoY to 1%-2% YoY; however, it kept its core CPI forecast unchanged at 0%-1% YoY.

According to OCBC Bank Treasury Research, while core CPI will tick higher in the coming months, the return to Phase 2 (Heightened Alert) from 22 July and the implicit downside risk to the third quarter of 2021 gross domestic product growth outlook, should dampen consumer sentiments and hence private consumption. 

“We retain our 2021 CPI forecast at 1.5% YoY (Headline) and 0.7% YoY (Core). Wage growth should also stay subdued at this juncture. Although private transport and accommodation costs may stay buoyant amid firm demand for cars and rental accommodation, as base effects fade, headline CPI should ease in the second half of the year. The S$NEER is still well contained within the 0%-1% territory above its parity band, therefore any tightening speculation for the MAS monetary policy review should stay muted in the near-term,” they said.

UOB agreed with this sentiment, saying that the risk for inflation is relatively balanced.

“Higher external inflation amid higher commodity prices and strong energy demand could continue in the latter half of 2021; although potentially higher global oil supply in the second half of 2021 may limit the upward price pressures then. Increased COVID-19-led risks and social restrictions suggest the persistence of negative output gaps seen in some of Singapore’s key trading partners, which will likely cap import prices pressures,” UOB said.