Brace for even higher inflation for remainder of 2012

CPI will surge in September and will stay elevated till December, government estimates.

Rising COE premiums this August will trigger a spike next month, which coupled with imputed rentals should keep CPI around the current high and result in a year average of between 4-4.5%, according to an outlook report from the Ministry of Trade and Industry (MTI) and Monetary Authority of Singapore (MAS) in a joint release.

"Given the generally sluggish economic environment, the pass-through of wages and other business costs to consumer prices will continue at a more moderate pace than that seen earlier this year. At the same time, global commodity prices remain below year-ago levels which will contain domestic oil and food inflation in the near term. MAS Core Inflation will remain close to the current rate over the next few months and average between 2.5-3.0% for the whole year," said MTI and MAS.

"Meanwhile, CPI-All Items inflation will stay elevated and average 4.0-4.5% in 2012. Notably, CPI-All Items inflation is expected to rise in September due to the surge in COE premiums in August, as well as the base effects associated with the disbursement of government rebates," they added.

"For the rest of 2012, COE premiums are likely to remain sharply higher than a year ago. Imputed rentals will also continue to add significantly to overall CPI inflation, as leasing contracts are renewed at higher rentals, especially in the HDB segment," they said further.