Core inflation turns positive in February in Singapore

Core inflation turned positive for the first time in a year

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

November's core inflation fell in Singapore

November’s core inflation fell in Singapore

Core inflation fell as consumer prices in Singapore declined in November, as authorities forecast a “mildly positive” turn in 2021.

Core inflation fell to -0.1 percent year-on-year in November, compared with October’s -0.2 percent, data from the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) showed on Wednesday.

The slower rate of decline in November was mainly due to a smaller fall in the costs of services and electricity and gas, as well as higher food inflation.

Services costs fell by 0.2 percent in November, mainly due to a smaller decline in outpatient services fees and an increase in recreational and cultural services costs, the agencies said.

The cost of electricity and gas fell more modestly by 6.8 percent in November, compared to the -7.2 percent in October, as targeted utility rebates ceased in the month before.

Food inflation edged up by 1.8 percent in November, primarily due to a steeper increase in the prices of non-cooked food and restaurant meals.

The cost of retail and other goods fell more sharply by -2 percent. This was due to a larger decline in the prices of clothing and footwear and a slower pace of increase in the cost of household durables.

Breakdown of the cost use to calculate de core inflation

Private transport costs and accommodation inflation stayed unchanged in November compared to October, at -1.3 percent and 0.3 percent respectively.

MAS and MTI retained their outlook from October on external inflation remaining low, amid weak demand in key commodity markets and “the persistence of negative output gaps” in Singapore’s major trading partners.

“On the domestic front, cost pressures are expected to stay subdued, with the accumulated slack in the labor market weighing on wages,” said MAS and MTI.

“Nevertheless, core inflation is forecast to turn mildly positive in 2021, as the disinflationary effects of government subsidies introduced this year fade and demand for some domestic services gradually pick up.”

Accommodation costs are expected to fall as rentals could soften, due in part to the decline in foreign employment, said the agencies.

Private transport costs should rise modestly ahead of an anticipated reduction in Certificate of Entitlement supply next year.

MAS and MTI forecast core inflation and overall inflation to come in at between -0.5 percent and 0 percent in 2020.

In 2021, core inflation is expected to average 0 percent to 1 percent, while overall inflation is expected to be between -0.5 percent and 0.5 percent. Last month, MTI said the Singapore economy is expected to shrink between 6 percent and 6.5 percent this year.

Source: Channel News Asia

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