Singapore’s core inflation for the month of November remained unchanged from October as it stood at 0.6%. This is as lower services inflation was offset by a smaller decline in the cost of retail good, said the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) in a joint news release on Monday (23 December).
This percentage is the lowest in more than three years since March 2016. It is also slightly lower than the 0.7% predicted in a Reuters poll.
Core inflation does not include the costs of accommodation and private road transport, which are more affected by government policy and not considered part of the citizens’ daily expenses.
However, the overall inflation or headline, rose to 0.6% last month, higher than the 0.4% in October. This was due to an increase in private road transport inflation and smaller declines in the accommodation, even as services inflation eased, MAS and MTI said.
Based on a Bloomberg poll, the headline inflation went up in accordance with economists’ expectations. Unfortunately, the core inflation did not meet their expected figure of 0.7%.
Private road transport inflation rose to 2.3% in November, from 1% in the previous month, reflecting higher petrol prices because of the volatility in oil prices and Electronic Road Pricing (EPR) charges.
Apart from that, the cost of retail goods fell by 0.5% last month, less than the 0.8% dip in October. It saw a more moderate pace of decline due to smaller drops in the costs of household durables and clothing & footwear.
Accommodation costs decreased by 0.2% in November, easing from the 0.4% drop in October, as housing rentals declined more gradually, the press release stated.
As for the cost of electricity and gas bills, it went down by 11.8% last month, less than the 12.5% decline in October. The authorities explained that the Open Electricity Market (OEM) had a smaller dampening effect on electricity prices after a slowdown in new take-up rates.
Food inflation stood at 1.7% last month, unchanged from October, as a slower pace of increase in the cost of non-cooked food offset a faster pace of increase in the prices of prepared meals.
Services inflation edged down to 1.1% in November, from 1.2% in October, mainly due to smaller increase in medical and treatment fees.
However, telecommunications services costs rose in November after two straight months of decline.
Outlook for 2020
The authorities revealed that external sources of inflation will mostly like stay “benign” in the coming quarters.
“In the quarters ahead, external sources of inflation are likely to remain benign, amid weak demand conditions, and generally well-supplies food and oil commodity markets. However, oil prices could be volatile in the near term, reflecting geopolitical risks,” MTI and MAS noted.
On the domestic front, labour market conditions are softening slightly and this would lower wage growth in 2019 and 2020, compared to 2018. At the same time, non-labour costs such as retail rents should stay subdued because of the weaker economic environment.
The Republic’s core inflation is expected to come in at the lower end of the 1 to 2% range in 2019, and average of 0.5 to 1.5% in 2020, the authorities said.
They added that the overall inflation is projected to be around 0.5% in 2019, and average 0.5 to 1.5% in 2020 as the negative contribution of imputed rentals to headline inflation dissipates.