Inflation eased to 1.7% in January

Slower growth in electricity and gas prices outweighed higher services inflation.

Singapore’s core inflation excluding the costs of accommodations and private road transport eased to 1.7% on a YoY basis in January from 1.9% in December, according to data from the Singapore Department of Statistics (SingStat).

The fall reflected a slower pace of increase in the cost of electricity and gas, which outweighed the higher services inflation, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) explained in a statement.

Meanwhile, consumer price index (CPI-All Items) inflation came in lower at 0.4% YoY in January from 0.5%. The cost of electricity & gas rose at a slower pace of 6.5% YoY in January, compared to the 14.6% increase in the previous month. This was largely due to a downward revision in electricity tariffs given lower oil prices in the preceding months , as well as the effect of the phased nationwide launch of the Open Electricity Market (OEM) on electricity prices, the agencies explained.

Meanwhile, the overall cost of retail items rose 1.4% YoY in January, easing from the 1.7% increase in December. “This mostly reflected a steeper decline in the prices of telecommunication equipment and recreation & entertainment goods, as well as a slower pace of increase in the prices of household durables & supplies,” they noted.

Food inflation remained unchanged at 1.4% YoY in January as price increases for both non-cooked food items such as fish and prepared meals remained broadly the same.

Services inflation picked up to 1.7% YoY in January, from 1.5% in December on account of an increase in public transport fares, which outweighed a smaller rise in holiday expenses.

Private road transport costs declined 3.4% YoY in January which reflected a moderation from the 3.7% fall in December, as the pace of reduction in car prices eased, more than offsetting lower petrol prices, the agencies explained.

Accommodation costs also fell 1.9% YoY in January, the same pace of decline as in the previous month, as a more gradual fall in housing rentals offset a smaller rise in the cost of housing maintenance & repairs.

“External sources of inflation have receded as global oil prices fell sharply in Q4 2018, mainly on oversupply concerns. As a result, global oil prices are expected to be lower this year compared to 2018,” they said. “On the domestic front, supportive labour market conditions should underpin wage growth and continuing price pressures. However, the extent of overall price increases will be capped by greater market competition in several consumer segments, such as telecommunications, electricity and retail.”

Given the sharp decline in global oil prices in recent months, the forecast for headline inflation in 2019 was revised down to 0.5–1.5% from 1–2%. Core Inflation is unchanged at 1.5–2.5%.