Singapore stuck in its longest stretch of deflation since GFC

Inflation has been in the red for six months.

Singapore has been languishing in its longest period of falling consumer prices since the Global Financial Crisis (GFC) in 2008-2009.

Data from the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) showed that Singapore's inflation declined 0.5% year-on-year in April, marking the sixth consecutive month of negative inflation.

UOB Economist Francis Tan noted that consumer prices fell in April due to the soft residential leasing market, lower private transportation costs, low oil prices and the disbursement of the Service & Conservancy Charges rebates in the same month.

Tan stated that while inflation is expected to remain in the red until August, prices will inch higher once oil prices recover and the impending Fed rate hike kicks in.

“Going forward, we caution against higher, rather than lower, prices. First, oil prices have been moving northward recently. Second, the low base in WTI prices towards the end of 2014 will likely see base effects kicking in and oil prices to be on a year-on-year increase in 4Q 2015. Third, the impending US interest rate normalization may see the SGD depreciating against the USD to reach 1.40/USD by end 2015. That may see upward pressures on imported inflation as the SGD weakens,” Tan said.