It's a car shopping spree: Car prices predicted to get softer until July

Thanks to the 32% COE quota hike.

Expect more cars to zoom past Singapore's roads as the COE allocation has been raised to 4,019 per month until July. This will consequently push car prices to get customer-friendly during the said period.

According to DBS, CPI inflation will run sideways. Headline May14 inflation is expected to register 2.5% YoY, unchanged from the previous month. 

Here's more from DBS:

While we had earlier anticipated higher rate of inflation, the trajectory of the CPI has been lowered due to more policy changes by the transport authority.

The Land Transport Authority is raising the COE quota during the May to July period by 32% to 4,019 per month, as compared to 3,043 per month in the preceding three months.

Higher COE allocation naturally implies softer car prices ahead and consequently lower than anticipated CPI inflation because of a high 11.7% weightage for private transportation cost within the CPI basket.

Average COE premium has fallen by about 20% since March and the bias is further downwards. However, domestic cost pressure, stemming from the labour crunch, will remain a primary source of inflation.

And firms are expected to continue to pass on accumulated costs to consumers, leading to broad-based price increases across the economy. Latest core inflation (CPI inflation minus private transport and accommodation costs) registered 2.3% YoY.

This is the highest since Sep12 and it appears that it will continue to rise.