Looks like our inflation rate is edging up again, but look on the good side: a rising tide lifts all boats. “Uh, That’s an analogy for capitalism, not inflation.” Funny, sometimes it almost seems like the two are related. Anyway it’s not a big surprise to anyone but let’s look at the reasons. We may be able to spot survival methods for each category:
How is Inflation Calculated?
Inflation is calculated based on the Consumer Price Index (CPI). This is a percentage that expresses how much the price of goods have risen. You might also hear about core CPI or “core inflation”, which excludes the rising cost of housing and private transport*.
(*On the basis that housing and private transport costs are less relevant to the average Singaporean. You know this is a correct assumption, as our politicians possess a firm grounding in reality).
As of October, the CPI edged up to 2% from 1.6% in September. Projected inflation for 2013 is between 2.5% – 3%.
The main categories to look for are:
- Private Transport
Private transport costs have risen by 2.7%.
The spike is caused by rising COE premiums, and is set to continue. Come February, cars will no longer be grouped according to engine capacity alone, causing some models to move from Category B to Category A. This will cause their prices to rise, so buyers are rushing to purchase before the changes happen.
In public transport, we also predict a rise due to fare hikes. New concessions have already been announced, along with a clear statement that regular commuters will bear part of the cost.
What to Do:
If you need a car, consider leasing instead of buying. A rush to get COEs always leaves bidders spending more than they’d need to otherwise. On top of that, new loan curbs require a down payment of 40% – 50%. That’s about $70,000 in cash for even a mid-range family car.
For the record, $70,000 sunk into an investment fund for 10 years (as long as the car’s COE lasts) can make the difference between retiring and working past 70.
As for public transport, you have as many options as the dinosaurs did before the meteorite landed. Either start joining walkathons for practice, or budget more for your EZ Link card.
Food prices are up by 2.5%. The rise reflects both uncooked food (i.e. the raw ingredients you get from the market) and prepared meals, like in coffee shops, diners, etc.
Why are food prices going up? The reasons for this one are hard to pinpoint: you can write a whole encyclopaedia on the reasons, from crop conditions in other countries to transport costs. It might be worth noting that, as COE prices go up, so does the cost of transporting food – this could be related to point 1.
What to Do:
Be a bit fussier when grocery shopping. In Singapore, it’s not uncommon to find supermarkets with significant price differences. You may also want to stick to neighbourhood markets.
You can also get a cashback credit card for groceries, to offset the cost a bit. We catalogue these at SmartCredit.sg.
Inflation in the service industry actually declined, from 2.7% in September to 2.5%. Don’t count on it staying low though.
We’re undergoing a labour crunch, and it impacts both the entertainment and food and beverage (F & B) industries. They can hire fewer foreign workers, so they may turn to pricier locals. Expect them to pass the costs down to customers.
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What to Do:
Not much you can do here, except make a commitment to go out less.
Inflation in this area moderated to 1.9%. It’s usually a main source of inflation, so that’s a surprise.
Or not: a lot of housing rebates have been given out by HDB. On top of that, the pounding that resale flats took (in terms of price) may have something to do with it. Don’t expect it to dip though, as Permanent Residents (PRs) can no longer buy flats until they’ve stayed for three years. That might push rental prices through the roof.
What to Do:
Make sure you’re born in Singapore. Besides that, pick the right home loan to keep the cost of your house as low as possible. You can compare them on SmartLoans.sg.