Singapore hopelessly stuck in deflation’s unyielding grip

As long as housing, transport costs stay low.

June’s negative headline inflation print shows that deflationary trends are entrenched in Singapore, according to a report by HSBC.

HSBC said that Singapore’s headline consumer price index (CPI) is likely to remain in the red due to lower transport and accommodation costs.

“June's inflation print didn't offer much new in terms of Singapore's inflationary outlook. The same suspects have continued to drive down headline inflation - accommodation and private transport - and we see this trend continuing through 2015. Recent comments by MAS Managing Director Ravi Menon suggest the central bank is in no rush to undo the macro-prudential measures that are contributing to the decline in house prices. Meanwhile, a higher COE supply is engendering lower auction premiums,” the report said.

“Overall, the trend for the rest of 2015 is unlikely to change much. We maintain our forecasts of -0.3% for headline CPI and 0.6% for core in 2015. In the June CPI statement, MAS maintained its forecast ranges of -0.5 to 0.5 for headline and 0.5 to 1.5% for core, but now expects both measures to end up in the bottom half of their respective ranges,” the report added.