Due to the drop in private transport costs and a sharp fall in the cost of services, core inflation dropped for the second consecutive month in March.
This is due to the COVID-19 pandemic which led businesses to reel from the ill-impacts.
Based on the figures published by the Monetary Authority of Singapore (MAS) and the Ministry of Trade & Industry (MTI) on Thursday (23 April), core consumer prices fell 0.2 per cent from March 2019 – higher than February’s 0.1 per cent drop.
Core consumer prices, however, do not include accommodation and private transport costs.
Back in February, core inflation became negative for the first time in 10 years.
In March, all-items inflation was 0 per cent year-on-year, compared to 0.3 per cent the month before. This figure suggests that overall consumer prices reached their lowest level since January 2018.
MAS and MTI explained that the larger drop in services prices was due to the lower costs of taxi, private hire vehicles, and telecommunication services in addition to the bigger declines in holiday expenses and healthcare.
Year-on-year March comparison shows that the overall cost of services fell 0.7 per cent, which is more than the 0.4 per cent decline in February.
Private transport costs dropped 0.3 per cent last month, compared to 2.4 per cent in February. This is caused by the smaller rise in car prices as well as the decline in petrol prices and parking fees.
Food prices increase 1.5 per cent in March, compared to 1.6 per cent the month before. This is due to the smaller increases in the prices of non-cooked food and restaurant food.
The costs of retail and other goods also dropped at a slower pace of 0.9 per cent last month, compared to 1 per cent in February. This is driven by the smaller price fall for medical products and recreational goods.
Due to a slowdown in new take-up rates, this has slightly dampened electric prices in the Open Electricity Market. As a result, the drop in gas and electricity costs in March at 6.2 per cent is less than in February at 7.4 per cent.
Accommodation costs also saw a rise of 0.5 per cent last month compared to 0.4 per cent in February. This was fuelled by the increase in housing rentals.
In March, MAS lowered its 2020 forecast range for core inflation and overall consumer price inflation to between -1 and 0 per cent. This is to reflect the declining consumer prices as the COVID-19 pandemic batters economic activity.
Oil prices should remain low for an extended period and it will influence the prices of energy-related components of the consumer price index, MAS and MTI clarified.
They also stated that imported food prices could increase due to international measures erected to contain the pandemic which caused supply chain disruptions. The price increases for discretionary goods and services need to be done seeing that consumer demand is dampened by the safe distancing measures and the weaker labour market conditions.