SINGAPORE: Singapore’s core inflation rate fell to 2.5 per cent in July, marking its lowest since February 2022. This decrease surpassed analysts’ expectations and continues a trend of easing inflation rates, following June’s 2.9 per cent, as reported by The Straits Times.
Core inflation, which excludes private transport and accommodation costs to better reflect household expenses, fell to 2.5 per cent year-on-year (YoY) in July, exceeding analysts’ expectations of 2.9 per cent.
However, despite this improvement, many Singaporeans online are saying that they still feel that prices for everyday items are high.
One asked, “Why do I still feel everything has gotten more expensive?” Another expressed that despite the drop in inflation, “the damage has been done.” One commenter also questioned why prices for items like Ya Kun Kaya Toast have surged by “24.677%.”
In a recent report, Singaporeans online deemed a S$7.40 kaya toast set “ridiculous”.
Others commented, “Prices never drop. Inflation already did its job. No need to be so happy.”
However, one person was slightly more optimistic than many, commenting, “Our chicken rice is still gonna be 9 dollars a plate in twenty years.”
The Ministry of Trade and Industry (MTI) and the Monetary Authority of Singapore (MAS) stated in their Aug 23 inflation report that they expect core inflation to average between 2.5 per cent and 3.5 per cent for the entirety of the year 2024.
Meanwhile, overall inflation is projected to be within the 2 per cent to 3 per cent range.
These projections remain consistent with the revised forecast MAS provided on July 26, where the overall inflation estimate for 2024 was lowered to 2 to 3 per cent from the previous range of 2.5 to 3.5 per cent.
MAS expects core inflation to continue moderating through the year, with further easing anticipated in the fourth quarter (Q42024).
They also anticipate private transport inflation to moderate due to a larger supply of Certificates of Entitlement (COE) and a gradual easing in accommodation costs as more rental housing becomes available.
DBS Bank economist Chua Han Teng expects core inflation to fall further in 2024 compared to 2023.
He attributes this to “still well-behaved” global commodity prices, contained imported price pressures, and easing domestic business costs passed on to consumers.
“Given the significant downside surprise in July, core inflation may return to around 2 per cent sooner than anticipated,” he noted.
However, concerns remain about rising imported inflation, especially in the “food and live animals component,” which could impact the overall disinflation process.
UOB pointed out that while the drop in inflation is “certainly helpful to support our view that MAS will ease (monetary) policy slightly in October,” it may not fully address concerns about the recent months’ higher imported and external inflation.
OCBC Bank’s chief economist, Selena Ling, suggested that the current disinflation trend could allow for potential monetary policy adjustments in the months ahead. She advised monitoring inflation trends in services, private transport, and accommodation.
In July, private transport costs increased by 0.9 per cent YoY, compared to the 0.7 per cent fall in June, due to smaller drops in vehicle prices and a rise in petrol prices. Services inflation dropped to 2.9 per cent from 3.4 per cent in June, driven by slower increases in holiday expenses.
Accommodation inflation eased slightly from 3.3 per cent to 3.1 per cent, and food inflation decreased from 2.8 per cent to 2.7 per cent. Retail goods inflation also fell from 0.5 per cent to 0.3 per cent, while electricity and gas inflation also went down, from 6.9 per cent to 6.6 per cent.
/TISG
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