Inflation down to 1.4% in March

Smaller price increases in retail and electricity & gas offset higher services and food inflation.

Singapore’s core inflation, excluding the costs of accommodations and private road transport, eased to 1.4% on a YoY basis in March from 1.5% in February, according to data from the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI).

The fall came as smaller increases in the costs of retail items and electricity & gas more than offset higher services and food inflation.

Despite lower core inflation, smaller declines in private road transport and accommodation costs on a YoY basis contributed to consumer price index (CPI-All Items) inflation rising at a faster pace of 0.6% in March compared to 0.5% in February.

The overall cost of retail items inched up 0.1% YoY in March, lower than the 1.1% increase recorded in February. The lower rate of inflation was due to smaller increases in the prices of clothing & footwear and personal care products, as well as a decline in the cost of household durables. The effect of the higher tobacco excise duty introduced in February 2018 also dissipated in March 2019.

Meanwhile, the cost of electricity & gas rose 3.9% YoY in March, which was lower than the 5.5% increase in February. “This reflected the dampening effect of the phased nationwide launch of the Open Electricity Market (OEM) on electricity prices,” the agencies noted.

Food inflation picked up to 1.6% YoY in March, from 1.4% in the preceding month, due to a faster pace of increase in the prices of prepared meals and non-cooked food items. On a month-on-month basis , the overall price of food was unchanged as an increase in the prices of restaurant and hawker meals was offset by a fall in the prices of non-cooked items such as fish & seafood, dairy products and vegetables.

Services inflation rose to 1.7% YoY in March, from 1.5% in February primarily because of higher inflation for holiday expenses, coupled with a smaller decline in telecommunication services fees. On a MoM basis, services costs dipped 0.3% due to lower holiday expenses and airfares.

Private road transport costs decreased 0.9% YoY in March, which was less than the 2.3% drop seen in the preceding month, on account of a more gradual decline in car prices and also a rise in petrol prices following the decline in the previous month.

Accommodation costs fell at a more moderate pace of 1.4% YoY in March, compared to the 1.6% decline in the previous month, as the fall in housing rentals eased.

According to MAS and MTI, external sources of inflation are likely to be benign in 2019, as global oil prices are expected to come in lower for the year as a whole compared to 2018, whilst food prices could only pick up slightly on average.

Reflecting the fall in global oil prices in late 2018 and a sharper-than-anticipated decline in electricity prices following the roll-out of the OEM, the forecast for MAS Core Inflation has been revised to 1–2% in 2019, from 1.5–2.5% previously.

“Core inflation is likely to come in near the mid-point of the revised forecast range. Meanwhile, CPI-All Items inflation is expected to average 0.5–1.5% in 2019,” the agencies explained, adding that private road transport costs are projected to be largely unchanged from 2018, whilst accommodation costs are likely to decline at a slower pace in 2019.