Chart of the Day: This graph shows how deep COE premiums really plunged

But Feb data pushed inflation to 4.9%.

According to DBS, CPI inflation for Feb13 came in higher than expected whereas industrial production figures today will not look great either.

Indeed, inflation reading for Feb13 surprised on the upside. The reading came in a 4.9% YoY, up from 3.6% in the previous month, and against a consensus forecast of 4.1%.

Festive season effect is one reason while the low base last year is another. But plainly, it boils down to the transport CPI index. Transport CPI led the surge with a 13.9% YoY rise.

Here's more from DBS:

That’s mainly because COE premiums were still exceptionally high back in February. The COE premiums on average were about 25% higher than they were back in the same period last year.

This has a strong impact on the transport CPI and henceforth on the overall CPI inflation. Note that transport segment accounts for 11.66% of the total CPI basket and it has been largely driven by the COE premium fluctuations in recent years.

Yet, this is probably going to be a one-off. The plunge in the COE premiums in March due to the recent introduction of tighter car loan financing terms, will possibly drive inflation lower.

Though hikes in the import tax for cars will lift car prices, the effect from the falling COE premiums will likely override that.

The net impact is probably a modest easing in the transport CPI inflation in the coming months.