Chart of the Day: Manufacturers grapple with sharp spike in labour costs

Unit labour costs rose by 5.3% in Q1.

Singapore's business owners and manufacturers are grappling with higher unit labour costs due to the republic's ongoing restructuring program.

This chart by Fitch shows the sharp spike in unit labour cost index of the overall economy, along with the sharp rise in unit business cost index in the manufacturing sector.

“Strict immigration policies related to foreign workers coupled with an already tight labour market are expected to keep underlying costs pressures high. Unit labour costs rose by 5.3% yoy in 1Q15,” said the report.

Here’s more from Fitch:
However, downside risks to headline inflation are greater in the near-term due to lower oil prices. The Monetary Authority of Singapore revised downwards its forecast for core inflation for 2015 to 0.5%–1.5% from 2%-3% in January 2015, mainly on lower oil prices and weaker global growth outlook and the reduced the slope of the Singapore dollar nominal effective exchange-rate policy band.

Singapore continues to face the challenge of trying to manage weaker growth and higher inflation as the government tries to implement its medium-term economic transformation agenda of moving Singapore to a higher value-add economy with higher productivity.