According to consumer price index (CPI) data released on Monday (24 Feb), Singapore’s core inflation missed industry forecasts in January as a result of a sharper decline in the cost of retail and other goods.
Core inflation is a central bank metric that excludes accommodation and private transport costs. In January, core inflation sat at 0.3 per cent, which was lower than the 0.9 per cent expected by the private sector players in a Bloomberg poll and also lower than December 2019’s rate at 0.6 per cent.
As for all-items inflation or headline inflation, the rate in January was 0.8 per cent, which was the same as December 2019 but a little below the private forecast of 0.9 per cent.
The samples and weights of items used to calculate the index were also changed while the Ministry of Trade and Industry (MTI) and the Monetary Authority of Singapore (MAS) stated that “part of the fall in core inflation also reflected the impact of the rebasing of the CPI to 2019 as the base year.”
The global outbreak of Covid-19 virus has landed a severe blow on the country’s consumer-dependent sectors since mid-January. Tourism-related industries have been especially affected, such as hospitality.
As the official full-year growth forecast was revised downwards last week to reflect the likelihood of a recession, private-sector economists would like for the MAS to loosen monetary policy in April this year.
In a joint statement, MAS and MTI remarked that they will monitor the price trends, as well as the impact of the rebasing of the CPI, even as “economic uncertainty, including the effects of the Covid-19 outbreak, will likely discourage firms from passing on any cost increases to consumers”.
MAS and MTI both added that “higher private transport inflation and an increase in accommodation cost was offset by lower inflation in the remaining core CPI basket” in January and that “inflationary pressures are expected to remain subdued in the near term”. Alongside this, the conditions of domestic labour market have continued to soften, the two organisations added.
Compared to the end of last year, car prices were higher and housing prices rebounded in January, which led to higher headline inflation. However, prices of shoes, clothes and medical products fell more, with the year-on-year decline in the cost of goods reaching 1.4 per cent, higher than the 0.9 per cent in December.
Compared to the previous month, services inflation in January fell to 0.5 per cent from 1.2 per cent. This is the result of higher pre-school subsidies which led to lower cost of education, lower healthcare costs and a smaller hike in telecommunication service fees.
The official forecasts by MTI and MAS for both headline and core inflation rates this year have not been changed, still within the range of 0.5 per cent to 1.5 per cent.