Singapore sees longest deflation stretch since 1977

Consumer prices fell a further 0.2% in September, but expected to rise next year.

There is now a significant ray of hope for Singapore's consumer prices as the index (CPI) posted its smallest fall after being stuck in the doldrums for 23 months now.

According to the latest data by the Monetary Authority of Singapore and Ministry of Trade and Industry, overall consumer prices fell 0.2% in September, its tiniest contraction since December 2014.

This marked the longest stretch of negative inflation seen in the city-state since 1977.

According to MAS and MTI, CPI inflation has troughed with the latest readings, and is projected to pick up 0.5% to 1.5% next year, from around 0.5% in the contraction zone for 2016.

This projected growth in consumer prices will most likely be due to the rise in private road transport cost.

"The cost of private road transport is projected to rise in 2017, largely as a result of the expiry of the road tax rebate for petrol vehicles," the two said in a statement.

Meanwhile, MAS Core Inflation moderated to 0.9% in September from 1.0% in August, largely on account of lower services inflation, which more than offset the stronger pickup in food prices.

It is expected to average around 1% in 2016 before rising to 1% to 2% next year.

This would come as energy related components begin to contribute positively to inflation and temporary disinflationary effects from budgetary measures fade.

"However, the increase in core inflation will be gradual, given the absence of more generalised demand-induced price pressures," the institution said