Singapore's core inflation continues to rise in August

SINGAPORE: Consumer prices in Singapore rose again in August, driven by higher food inflation and a smaller decline in the cost of retail and other goods, official data on Thursday (Sep 23) showed.

Core inflation inched up 1.1 per cent year-on-year, an increase from the 1.0 per cent in July when it rose to a two-year high.

Singapore's core inflation, which excludes accommodation and private transport costs, has remained positive for seven consecutive months.

The headline consumer price index, or overall inflation, eased slightly to 2.4 per cent in August from 2.5 per cent in July, according to figures from the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI).

This reflected lower private transport inflation, which more than offset the rise in core inflation, said MAS and MTI.

HIGHER FOOD PRICES

Food inflation rose to 1.5 per cent in August, up 0.4 percentage points from July, as the prices of non-cooked food and prepared meals saw larger increases.

For non-cooked food, this was mainly due to a steeper rise in the cost of fruits, said the authorities.

Electricity and gas prices as well as prices of services also rose, but at a slower pace compared to July, recording 9.7 per cent and 1.2 per cent respectively. The latter was due to a steeper fall in telecommunications services fees, said MAS and MTI.

Inflation of retail and other goods stayed negative, but fell at a more gradual pace of 1.0 per cent. This reflected higher price increases for personal effects and a smaller decline in the cost of personal care products, said the authorities.

ACCOMMODATION UP, PRIVATE TRANSPORT SLOWS

Accommodation prices rose at a faster pace in August, hitting 1.7 per cent. This was in line with the stronger pick-up in housing rents, said MAS and MTI.

The rise in private transport costs slowed to 10.8 per cent, down from 12.6 per cent in July. The authorities attributed this to a smaller increase in car prices and a decline in the cost of other private transport services.

INFLATION OUTLOOK

MAS and MTI projected that core inflation would continue to increase gradually in the coming months. A modest rise in overall inflation is also expected in Q4, supported by accommodation inflation.

The authorities maintained their forecast for core inflation to average 0 to 1 per cent for the whole of 2021, and overall inflation to be between 1 and 2 per cent.

"Lingering uncertainty" as Singapore transitions to living with COVID-19 could weigh on consumer sentiment and dampen domestic price increases in the near term, said MAS and MTI.

Wage increases should also continue to be "restrained" as slack in the labour market would take time to be fully absorbed, they added.

The authorities projected that commercial rents would stay low, putting a limit on overall business cost pressures.

But private transport inflation was likely to stay "resilient" due to "firm demand" for cars, they said. Accommodation inflation could also continue to pick up on the back of strong demand for rental housing.

As for external inflation, this remained "elevated" but showed signs of moderating, said MAS and MTI.

"Upward pressures on global inflation should ease further over the course of the year. Crude oil prices have declined recently due to concerns over the prospects for the global economy amid the spread of the more contagious Delta variant."

Supply-demand mismatches and "bottlenecks" in global transport should ease with a gradual recovery in production and logistics services, they added.

They also expected continued negative output gaps in some of Singapore's key trading partners to help moderate overall import price inflation for the year.