SINGAPORE: Singapore’s core inflation held steady at 5 per cent year-on-year in April, with lower inflation for electricity and gas, food as well as retail and other goods.
The lower inflation in these categories was offset by higher inflation for travel-related services last month, said the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) on Tuesday (May 23).
Core inflation had risen to 5.5 per cent in February and January this year, a 14-year high, before falling to 5 per cent in March.
Core inflation excludes accommodation and private transport costs. A Reuters poll of economists had forecast a 4.7 per cent increase in the core inflation rate in April.
Overall inflation rose to 5.7 per cent year-on-year in April, up from 5.5 per cent in the preceding month. This reflected higher inflation for services and private transport.
FOOD, ELECTRICITY AND GAS INFLATION
Electricity and gas inflation fell to 2.7 per cent year-on-year in April, down from 12.2 per cent in March. This was due to smaller increases in both electricity costs and the gas tariff.
On a year-on-year basis, the regulated electricity tariff fell by 0.9 per cent in the second quarter of this year, a reversal from the 14.9 per cent increase in the first quarter.
Food inflation moderated to 7.1 per cent in April from 7.7 per cent the preceding month, as prices of non-cooked food and prepared meals rose more slowly.
Inflation for retail and other goods eased to 2.9 per cent in April from 3.3 per cent, as the prices of household durables and clothing and footwear increased at a slower pace. The cost of personal effects fell.
Services inflation rose to 4.3 per cent from 3.4 per cent, on the back of a pickup in air fares and a faster pace of increase in holiday expenses.
Private transport inflation also increased to 10.4 per cent in April from 8.6 per cent the preceding month, as car prices rose more steeply.
Accommodation inflation edged up to 4.9 per cent as a smaller increase in housing rentals was more than offset by a larger increase in the cost of housing maintenance and repairs.
IMPORT PRICES DECLINED
MAS and MTI noted that global supply chain frictions have eased.
“Consumer goods inflation in the advanced economies has moderated, even as overall core inflation is still high. Energy and food commodity prices have fallen below their peaks seen last year,” they added.
“As a result, Singapore’s import prices have declined on year-on-year terms.”
Locally, unit labour costs are expected to rise further in the near term and businesses are expected to continue to pass through accumulated labour costs to consumer prices. This will happen at a “more moderate pace” amid a slowdown in domestic activity, said MAS and MTI.
Core inflation is expected to stay elevated in the next few months, the authorities noted.
It will remain on a “broad moderating path”, before slowing more discernibly in the second half of this year as imported inflation falls further and the domestic labour market eases.
“Meanwhile, with the increase in COE (Certificate of Entitlement) quota and ramp-up in the supply of housing units available for rental, private transport and accommodation inflation are expected to moderate over the course of the year,” said MAS and MTI.
For 2023 as a whole, the authorities’ forecasts remain unchanged for headline and core inflation. Headline inflation is projected to average 5.5 per cent to 6.5 per cent, while core inflation is expected to average 3.5 per cent to 4.5 per cent.
Excluding the transitory effects of the 1 percentage point increase in the Goods and Services Tax to 8 per cent, headline inflation is expected to come in at 4.5 per cent to 5.5 per cent. Core inflation is projected to come in at 2.5 per cent to 3.5 per cent.
“Upside risks remain, including from fresh shocks to global commodity prices and more persistent-than-expected tightness in the domestic labour market,” said MAS and MTI.
“At the same time, there are also downside risks such as a sharper-than-projected downturn in the advanced economies which could induce a general easing of inflationary pressures.”