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Singapore: Food price hike fuels higher-than-expected September inflation
SINGAPORE’S core and headline inflation rates edged up marginally in September, slightly above economists’ expectations, Department of Statistics (Singstat) consumer price index (CPI) figures showed on Monday.
The Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) maintained their inflation forecasts for 2021 and 2022, but their outlook has shifted towards expecting significant upward pressures, compared to the previous month’s report.
Headline inflation was 2.5 per cent, up from 2.4 per cent in August, while core inflation was 1.2 per cent, up from 1.1 per cent before. Economists had expected both readings to hold steady.
The rise in core inflation, which excludes accommodation and private transport, was largely driven by higher food inflation of 1.6 per cent, up from 1.5 per cent in August.
Electricity and gas costs also rose more sharply, by 9.9 per cent compared to 9.7 per cent in August. Accommodation inflation picked up to 1.9 per cent, from 1.7 per cent before.
Inflation rates remained unchanged for services (1.2 per cent), private transport (10.8 per cent), and retail and other goods (-1.0 per cent).
Most Singstat expenditure categories, distinct from the MAS and MTI categories, saw positive inflation in September. The exceptions remained the same as in August: clothing and footwear (-5.0 per cent), communication (-2.2 per cent), and miscellaneous goods and services (-0.3 per cent).
In Monday’s release, the MAS and MTI’s inflation outlook shifted significantly towards expecting greater upward pressures, compared to the month before.
They noted that global inflation “has remained elevated and is likely to persist for some time”, a contrast with their previous expectation that upward pressures on global inflation would ease.
Crude oil prices have risen on the back of the OPEC+ decision to keep supply increases modest, while demand for oil also picked up after global natural gas prices rose, they noted.
“The supply‐demand mismatch in various commodities and goods markets, as well as bottlenecks in global transportation, are likely to continue in the near term,” they added. And as economic recovery continues, underlying inflation in Singapore’s major trading partners should also gradually increase.
Domestically, the labour market recovery should continue, with wages expected to rise at a steady pace, and “consumer demand should pick up, allowing greater pass through of accumulating business costs to consumer prices”.
“Rising imported and labour costs, alongside the recovery in domestic economic activity, will support a steady increase in core inflation in the quarters ahead,” they said.
As for headline inflation, they expect accommodation inflation to remain firm and continue to support headline inflation next year, amid construction delays. But private transport inflation is likely to moderate, with a slower pace of increase in Certificate of Entitlement premiums and petrol costs.
In its Oct 14 monetary policy statement, the MAS had embarked on a surprise tightening of policy settings in view of accumulating external and domestic cost pressures.
The slope of the Singapore dollar nominal effective exchange rate (S$NEER) policy band was raised slightly, while its width and mid-point were unchanged. This restored the S$NEER band to an appreciation path, from the previous flat slope.
The MAS said then that it expected core inflation to come in near the upper -end of the 0 to 1 per cent forecast range for 2021 as a whole, and to be 1 to 2 per cent in 2022. Headline inflation was expected to be 2 per cent in 2021, and to average 1.5 to 2.5 per cent in 2022.
The MAS and MTI maintained these expectations in Monday’s release.
Source: https://www.businesstimes.com.sg/government-economy/food-price-hike-fuels-higher-than-expected-september-inflation