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Singapore inflation forecast raised to 1-2% as consumer prices climb again in June
SINGAPORE consumer prices rose for the sixth straight month in June, as higher transport and housing costs offset the steeper fall in the cost of retail and other goods.
Headline inflation of 2.4 per cent was unchanged from the reading in May, though it missed the median increase of 2.5 per cent forecast in a private-sector Bloomberg poll.
Core inflation came in at 0.6 per cent in June, falling below Bloomberg forecasts and easing from 0.8 per cent in the month before.
The Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) on Friday raised their official forecast for all-items inflation to between 1 per cent and 2 per cent in 2021, up from the range of 0.5 per cent to 1.5 per cent before.
The forecast for core inflation was kept unchanged, at zero to 1 per cent.
“Uncertainty in the economic outlook will weigh on consumer sentiment and hence (the) price increases in the near term,” the MAS and MTI said in a joint statement.
Still, they added: “While there is the risk that inflation could persist in some of Singapore’s major trading partners, this would be tempered by the continued negative output gaps in many of these economies, which should help to moderate Singapore’s overall import price inflation.”
Headline inflation is also expected to ease in the latter part of the year, they said.
Private road transport expenses increased by 14.9 per cent in June, picking up from a 14.5 per cent increase in the month before, as car prices increased.
Accommodation costs rose 1.1 per cent, against 0.9 per cent in May, on faster growth in rents.
Both private transport and accommodation expenses are excluded from the core inflation indicator, which influences the MAS’s exchange rate-based monetary policy.
But gains in these categories offset declines or slower price increases elsewhere, and thus kept all-items inflation elevated.
That’s mainly as the cost of retail and other goods fell by a sharper 1.8 per cent in June, compared with 0.8 per cent in May, thanks to a steeper decline in the prices of clothes (-8.7 per cent) and shoes (-10.4 per cent).
Khoon Goh, head of Asia research at ANZ, called these decreases “the main source of downside surprise” for the lower-than-expected inflation print.
Services inflation was flat on the month before, at 1.4 per cent, as price hikes for services such as tuition offset the slower growth in point-to-point transport fares.
Food inflation retreated to 0.9 per cent in June, from 1.0 per cent in May, as the price increase for non-cooked food items receded.
Electricity and gas costs declined 1.8 per cent in June, compared with 1.9 per cent the month before, on slower take-up of liberalised electricity market plans.
The MAS and MTI have projected that private transport and accommodation costs “should remain resilient on the back of firm demand”, although a fading base effect will slow the price gains for transport costs.
Selena Ling, head of treasury research and strategy at OCBC, commented that the higher forecast for the consumer price index (CPI) “took into account the rising external inflation amid higher global oil prices and also factory gate inflation in some major economies including China”.
Meanwhile, Barclays has also raised its inflation forecast to 1.9 per cent, from 1.7 per cent before, citing “headline inflation remaining stable at elevated levels”.
Still, the house kept its core inflation projection at an average of 0.7 per cent, in the upper half of the MAS forecast range.
“This remains well below its historical average of about 2 per cent,” wrote economist Brian Tan. He added that “we doubt a breach of the MAS headline inflation forecast would materially affect (foreign exchange) policy” as underlying inflation pressures remain subdued otherwise.
Source: https://www.businesstimes.com.sg/government-economy/singapore-inflation-forecast-raised-to-1-2-as-consumer-prices-climb-again-in-june