Singapore's inflation in line with expectations at 0.7%

Thanks to the smaller decline in accommodation costs.

Singapore’s headline inflation was in line with expectation as it only inched up 0.1 ppt to 0.7% YoY in August from 0.6% in July, the Department of Statistics (SingStat) revealed. It was backed by the smaller decline in accommodation costs.

Meanwhile, the Monetary Authority of Singapore (MAS) core inflation came in at 1.9% YoY which remained unchanged from July’s figures amidst higher retail and food inflation offsetting a moderation in services inflation.

Accommodation costs slipped 2.6% YoY easing from the 3% decline in July amidst a slower pace of decline in housing rentals and a larger increase in the cost of housing maintenance & repairs. Meanwhile, private road transport costs decreased by 0.2% which is the same pace with that of the decline in July as a smaller fall in car prices was offset by a less steep increase in petrol prices.

In the retail sector, prices of items increased 0.4ppt from July to 2% YoY in August due to the faster pickup in the prices of clothing & footwear, as well as an increase in the prices of personal care products following the decline recorded in July.

Food inflation rose 0.2 ppt from July to 1.7% in August on the back of a faster pace of increase in the prices of non-cooked food items and prepared meals. Meanwhile, services inflation eased to 1.3% in August from 1.5% in July amidst cheaper telecommunication services fees which had more than offset a faster pickup in airfares.

According to a joint announcement by MAS and the Ministry of Trade and Industry (MTI), imported inflation is likely to rise mildly as global oil prices have rallied since the start of 2018 and are expected to average higher for the full year as compared to 2017.

“Meanwhile, global food commodity prices are projected to rise slightly as demand strengthens amid ample supply conditions,” the announcement said. “Domestic sources of inflation are expected to increase alongside a faster pace of wage growth and a pickup in domestic demand.”

However, the agencies noted that the extent of consumer price hikes will remain moderate, as retail rents have stayed relatively subdued and firms’ pricing power may be constrained by market competition.

“MAS Core Inflation is expected to rise gradually over the course of 2018 to average in the upper half of the 1–2% forecast range for the full year,” they noted. “Similarly, CPI-All Items inflation is projected to be within the upper half of the 0–1% forecast range for the full year.”

They added that accommodation costs could fall by a smaller extent than in 2017, whilst private road transport inflation could slip in 2018 amidst the effects of the inflation from previous measures.