Singapore’s core inflation turned positive for the first time in a year, driven by an increase in services costs and higher food inflation.
Core inflation rose to 0.2 percent year-on-year in February, from -0.2 percent in January.
This was shown by data from the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI).
Core inflation – a key policy consideration for the central bank – excludes the price of private transport and accommodation.
The headline consumer price index (CPI), or overall inflation, rose to 0.7 percent in February, from 0.2 percent in January.
This was driven by higher private transport inflation, in addition to the rise in core inflation.
UOB economist Barnabas Gan said that the return of positive year-on-year core inflation in February highlights two issues.
“It suggests the reintroduction of higher prices in Singapore’s basket of goods and services that may affect the day-to-day outlay of most Singaporean households,” said Mr. Gan.
“Higher core inflation may also affect policy-making, in view of the upcoming monetary policy meeting by MAS in April,” he added.
The core inflation wasn’t the only thing it rose
Services costs rose by 0.5 percent in February, reversing the -0.3 percent decline in the previous month.
This was on the back of higher inflation for tuition and other fees, as well as a smaller decline in outpatient services costs.
As part of the COVID-19 response measures, the Singapore Government introduced subsidies for the treatment of respiratory illnesses.
“These subsidies exerted a smaller downward drag on the year‐on‐year inflation of outpatient services in February 2021 compared to previous months and should completely cease to weigh on year‐on‐year inflation from March 2021,” they said.
Holiday expenses saw a “milder pace of decline” while airfares rose in February, said MAS and MTI.
However, airfares and most of the components in the holiday expenses CPI were imputed using the overall change in overall inflation as they remain unavailable for consumption due to international travel restrictions.
Food inflation edged up to 1.6 percent in February from 1.5 percent in January as the prices of prepared meals rose at a pace similar to that in the previous month.
The cost of electricity and gas declined at a slightly faster rate at -9.8 percent on the back of a smaller increase in gas prices.
Source: Channel News Asia