Singapore core inflation cools more than expected to 3.1 percent in March

SINGAPORE (The Straits Times/ANN) -- Singapore’s core inflation eased more than expected in March as prices of food and services rose at a slower place, with overall inflation dropping to a two-and-a-half-year low.

Both core and overall inflation dipped from the previous month and came in well below analyst forecasts.

Core inflation - which excludes private accommodation and transport costs to better represent the expenses of Singapore households - fell to 3.1 percent year on year last month. This was after Chinese New Year prices sent core inflation jumping to 3.6 percent in February, from 3.1 percent in January.
Compared to February, core inflation dropped 0.2 percent, the Ministry of Trade and Industry (MTI) and the Monetary Authority of Singapore (MAS) said in their joint report.
Overall inflation slowed year on year to 2.7 percent, from 3.4 percent in February. This is the lowest since September 2021. The slowdown was largely due to a decline in private transport costs, in addition to lower core inflation.
Month on month, overall inflation dipped 0.1 percent.
Both inflation indicators came in well below market forecasts. Analysts polled by Bloomberg had tipped core inflation to come in at 3.5 per cent and overall inflation at 3.1 percent.
Dr Chua Hak Bin, economist at Maybank, noted that there was no discernible Taylor Swift shock to prices as airfares fell and holiday expenses rose at a slower pace. Retail and other goods inflation also eased.
American singer and song writer Taylor Swift held her “The Eras Tour” in Singapore from March 2 to 9, serenading to more than 300,000 fans including those from overseas.
“Core inflation has resumed its gradual downward trend after the blip during the festive Lunar New Year month. We expect core inflation to drift down towards 2.5 percent by the fourth quarter, opening the door for MAS to ease policy at the October meeting,” the economist said.
Earlier in April, MAS kept unchanged its monetary policy stance aimed at strengthening the trade-weighted Singapore dollar to combat inflationary pressures.
In March, private transport costs fell as car prices declined in tandem with lower premiums for certificate of entitlements (COE). Anyone who wishes to register for a new vehicle in Singapore must first obtain a COE.
Food inflation eased, mainly due to a smaller increase in the prices of non-cooked food, while services inflation moderated as airfares fell and holiday expenses rose at a slower pace.
Retail and other goods inflation eased due to a decline in the prices of clothing and footwear, and a more modest rate of increase in the prices of alcoholic drinks and tobacco.
Accommodation inflation edged down due to a smaller increase in housing rents. Electricity and gas inflation eased as electricity costs rose at a more moderate pace.
MTI and MAS maintained their estimates for both core and overall inflation in 2024 at 2.5 percent to 3.5 percent.
Excluding the transitory effects of the 1 percentage point increase in the goods and services tax rate to 9 percent, overall and core inflation are expected to come in at 1.5 percent to 2.5 percent.
Core inflation is expected to stay on a gradual moderating trend over the rest of the year as import cost pressures continue to decline and tightness in the domestic labour market eases, they said.
Although crude oil prices have risen in recent weeks, global prices for most food commodities, as well as intermediate and final manufactured goods, have continued to decline, they added.
Inflation for services associated with overseas travel should moderate further over the course of the year as supply conditions in hospitality sectors around the world improve, said MTI and MAS.
The gradually strengthening Singapore-dollar trade-weighted exchange rate should also continue to temper Singapore’s imported inflation in the months ahead, they said. On the domestic front, increases in unit labour costs have slowed in tandem with the cooling labour market. Businesses are likely to continue passing through the earlier increases in labour and other business costs to consumer prices, albeit at a reduced pace.
Private transport inflation is expected to be lower compared to last year with a larger projected COE supply this year.
Accommodation inflation should also continue to ease as the supply of housing units available for rental increases.

(Latest Update April 24, 2024)