Singapore core inflation drops to 3.0%, lowest in 16 months

SINGAPORE: Official data from Oct 23 (Monday) has shown that the core inflation in Singapore last month eased to 3.0 per cent on a year-on-year basis. It has decreased from this year’s high of 5.5 per cent in January and February, marking a 14-year-high.

This means that the country’s key consumer price gauge is the lowest it has been since March 2022, when it was at 2.9 per cent. September’s inflation rate is also in line with the 3.1 per cent rate economists had forecast in a poll for Reuters.

Last month, core inflation fell to 3.4 per cent, marking its lowest point in more than a year. This drop from July’s 3.8 per cent was primarily driven by reduced inflation in services, food, and retail.

The core inflation rate does not take into account costs for private road transport and accommodation. “Inflation has slowed across a broad range of goods and services, including for non-cooked food, food services, travel-related and point-to-point transport services”, said the Monetary Authority of Singapore (MAS) in a statement on Oct 23.

MAS also wrote that the inflation is projected to ease even further, estimating it between 2.5 per cent and 3 per cent year-on-year by December, adding that “Excluding the impact of the increase in the GST rate in January, core inflation is forecast at 1.5 to 2.5 per cent.”

MAS also noted that even though crude oil prices have risen in recent months, the prices of most food commodities intermediate and final manufactured goods around the globe have kept on moderating due to favourable supply conditions. “The stronger S$ trade-weighted exchange rate should also further temper Singapore’s import cost pressures in the quarters ahead,” it added in its statement.

For next year, labour costs are expected to increase at a slower rate while the labour market gradually cools.

“Private transport inflation should moderate for the year as a whole, alongside the expected increase in COE quotas. Accommodation inflation should also ease as the supply of completed housing units expands,” MAS added.

“Global economic activity has moderated reflecting weaker growth in the Eurozone and China, even as the US economy has thus far been resilient. In the near term, global final demand is expected to soften amid elevated interest rates. Nevertheless, the risk of a sharp global downturn, precipitated by financial vulnerabilities, has receded compared to earlier in the year. Growth in Singapore’s major trading partners should gradually pick up later in 2024 as inflation continues to ease and the electronics cycle turns up modestly, although the timing and extent of the recovery is subject to significant uncertainty,” said MAS. /TISG