Singapore Inflation Rises Slightly To 6.6%

Singapore’s consumer price inflation rose slightly at the start of the year amid rising costs for food and transport, but was much less than expected, while a renewed acceleration was seen in core consumer prices, data published by the Monetary Authority of Singapore and the Ministry of Trade and Industry showed on Thursday.

The consumer price index, or CPI, climbed 6.6 percent year-over-year in January, slightly faster than the 6.5 percent increase in the previous month. Economists had forecast inflation of 7.1 percent.

The MAS core inflation climbed to 5.5 percent in January from 5.1 percent in December, led by higher charges for services, food and retail, and other goods, along with the increase in the GST rate. Economists had expected core inflation of 5.6 percent.

Month-on-month, the core consumer prices rose 0.8 percent, and overall CPI moved up 0.2 percent.

Despite the downside surprise, price pressures remain evident, especially on the demand side, ING economist Nicholas Mapa said, citing the high 6.7 percent inflation for recreation & culture.

“With today’s report, we believe that the Monetary Authority of Singapore will retain its hawkish stance while monitoring price developments ahead of its April meeting,” the economist said.

The next inflation report, which will arrive before the April policy meeting, should be pivotal in determining whether the MAS will need to tighten its policy stance further or wait to see the impact of its cumulative tightening measures carried out since late 2021, Mapa added.

Among the main categories, prices of electricity and gas grew 11.5 percent from last year, though slower than the 16.5 percent gain in December.

Private transport charges rose 14.3 percent in January following a 15.5 percent increase in the previous month, amid a reduction in prices for cars and petrol.

Accommodation cost growth accelerated somewhat to 5.0 percent from 4.7 percent, reflecting a larger rise in housing rents.

Services cost inflation increased to 4.2 percent from 3.7 percent, and food price growth accelerated to 8.1 percent from 7.5 percent.

Looking ahead, Singapore’s imported inflation is expected to remain firm for some time, as wage pressures remain high in major advanced economies due to tight labor markets, and food and energy prices continue to remain elevated despite some easing.

There will be further increases in unit labor costs along with robust wage growth on the domestic front in the near term, and the cost of utilities is likely to remain high.

MAS Core Inflation is expected to stay above 5 percent in the first quarter of 2023, as previously projected.

The rate is expected to remain elevated in the second half of this year before slowing more discernibly in the second half as the current tightness in the domestic labor market eases and global inflation moderates.

For 2023 as a whole, taking into account all factors including the GST increase, headline and core inflation are projected to average 5.5-6.5 percent and 3.5-4.5 percent, respectively.

There are upside risks to the inflation outlook, including from fresh shocks to global commodity prices and more persistent-than-expected external and domestic sources of inflation, the MAS said.

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