Singapore cuts headline inflation forecast as January reading slows

In light of the sharp fall in global oil prices in recent months, the forecast for headline inflation in Singapore for this year was lowered to 0.5%-1.5% from the previous forecast of 1.0%-2.0% on Monday, announced a joint statement from the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI).

In tandem, the slower pace of increase in the cost of electricity and gas led Singapore’s Consumer Price Index (CPI) for the month of January to ease in its pace of increase compared to the previous month, as it gained 0.4% compared to a 0.5% increase in December.

In the statement from the MAS and MTI, the agencies said the external sources of inflation have receded as global oil prices fell sharply in the fourth quarter of 2018, mainly on oversupply concerns. As a result, global oil prices are expected to be lower for this year compared to last year.

Singapore’s core inflation, an indicator which excludes accommodation and private road transport costs, rose by 1.7% for last month, compared to an 1.9% increase in December.

The MAS and MTI has maintained the forecast for core inflation to come within the range of 1.5%-2.5%.

Prices of services, food, and retail items rose, while housing and private road transport costs fell

For last month, electricity and gas fees rose at a slower pace of 6.5%, compared to the 14.6% increase in December. The slower increase was attributed to the phased nationwide launch of the open electricity market on electricity prices and a downward revision in electricity tariffs due to the lower oil prices.

Food prices rose in the same pace as the preceding three months for January, up by 1.4%, as the prices of non-cooked food items and prepared meals remained broadly the same.

Prices of retail items gained 1.4%, easing from the 1.7% increase in the previous month, as the prices of clothing and footwear and household durables rose in a slower pace.

Services inflation picked up to rise by 1.7% last month, from 1.5% in December, due to an increase in public transport fares, which outweighed a smaller rise in holiday expenses.

Accommodation costs fell by 1.9% for last month, in the same pace of decline as December. The fall was due to the ongoing slide in housing rentals.

Private road transport costs fell by 3.4%, easing from the 3.7% decline in the previous month as a moderated fall in car prices was offset by lower petrol prices.