Singapore’s headline inflation up 0.6% in March

Consumer prices in Singapore gained 0.6% from a year ago for the month of March, accelerating from its pace of increase from the previous month, a joint statement from the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) released on Tuesday showed.

Consumer Price Index (CPI), also known as headline inflation, edged up from February’s 0.5% increase due to a rise in the prices of food items and services.

Singapore’s core inflation, an indicator which excludes accommodation and private road transport costs, eased from the previous month’s 1.5% increase to gain by 1.4%.

Core inflation forecast adjusted lower to 1.0%-2.0%

Commenting on the month’s figures, MAS and MTI said external sources of inflation are likely to be benign for 2019, as global oil prices are expected to come in lower for the year as a whole compared to last year. Meanwhile, food prices are expected to only pick up slightly on average.

‘An acceleration in inflationary pressures is unlikely against the backdrop of slower Gross Domestic Product (GDP) growth, uncertainties in the global economy, as well as the continuing restraining effects of MAS’ monetary policy tightening in 2018,’ MAS and MTI said.

The MAS and MTI projects headline inflation for this year to be at around 0.5%-1.5% while core inflation was revised lower to come within the forecast range 1.0%-2.0%, from the earlier projection of 1.5%-2.5%.

Oil prices rose to the highest levels in six months on Monday on concerns of a supply crunch after the United States (US) announced a further restriction to Iranian oil exports.

Year-to-date, oil prices have risen by more than 35%, led by output cuts from the Organization of the Petroleum Exporting Countries (Opec) and allied producers including Russia and the US sanctions on Venezuela and Iran.

Explaining on the lowering of the core inflation forecast in spite of the higher oil prices, IG market strategist Pan Jingyi said that while headline inflation finds a more direct relationship with oil prices, for the basket of items in core inflation, it includes the prices of items such as food prices which has an indirect relation to oil prices.

The trickle-down effect from the recent higher oil prices would therefore take some time before passing through to the prices of goods, Ms Pan said.

Hence if MAS and MTI were to make any revisions to the inflation numbers to reflect the recent surge in oil prices, the changes would most likely come around the second quarter of this year, she noted.

Prices of food and services rise, while the costs for housing and private road transport moderated

For last month, electricity and gas fees rose by 3.9%, lower than the 5.5% increase in February, due to the phased nationwide launch of the open electricity market on electricity prices.

Food prices rose by 1.6% for last month, from 1.4% in the previous month, as prices of non-cooked food items and prepared meals rose faster.

Prices of retail items edged up by 0.1%, easing from the 1.1% increase in the previous month, as the prices of clothing and footwear and personal care products did not rise as fast compared to the previous month.

Accommodation costs fell by 1.4% for last month, moderating from the 1.6% decline in February, due to the ongoing slide in housing rentals.

Private road transport costs fell by 0.9%, less than the 2.3% decline in February. A gradual easing in car prices and a rise in petrol prices supported the moderated price decline.