Inflation down 0.1% in February

Falling costs of airfares and holiday expenses dropped.

Core inflation dipped 0.1% YoY in February, reversing the 0.3% growth recorded in January, according to data from the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI).

The inflation decline was due to a 4% YoY fall in the cost of services as airfares and holiday expenses dropped. Likewise, CPI‐all items inflation fell to 0.3% YoY in February, which was dragged by lower private transport inflation.

Private transport inflation moderated 2.4% YoY in February from a 4.6% growth in January, no thanks to a smaller increase in car and petrol prices. Food inflation also contracted slightly to 1.6% from 1.7% over the same period, as the prices of prepared meals recorded smaller hikes, while non‐cooked food inflation remained flat.

Meanwhile, electricity inflation continued to fall but at a slower pace. It slipped 7.4% YoY in February, compared to the 8.1% slide in January, as the Open Electricity Market (OEM) had a smaller dampening effect on electricity prices following a slowdown in new take‐up rates.

In contrast, accommodation costs grew 0.4% YoY from 0.3% in January, thanks to a stronger pickup in housing rentals. Lastly, retail & other goods inflation slipped at a gradual pace at 1% from 1.4% last month, thanks to the smaller price dips in clothing & footwear items and medicines & health products.

Looking forward, MTI and MAS stated that external sources of inflation are likely to remain benign amidst weak demand conditions and generally well‐supplied food and oil commodity markets.

“Oil prices declined sharply in March and could stay depressed for an extended period amid the global economic slowdown and an anticipated rise in oil supply. However, international measures to contain the COVID‐19 outbreak have led to supply chain disruptions, which could put some upward pressure on imported food prices,” MAS and MTI said in a statement.

They are also expecting businesses in the aviation and tourism industries to further decline and the labour market may soften and dampen wage growth in 2020. “The economic uncertainty from the outbreak is also likely to discourage firms from passing on any cost increases to consumers.”

“Inflationary pressures are thus expected to remain subdued in the near term,” MAS and MTI concluded.