Economy
Singapore inflation edges higher in September 2024 despite easing overall prices
Household expenses in Singapore increased for the second consecutive month, with core inflation, excluding private transport and accommodation, rising to 2.8% year-on-year. A joint MAS and MTI statement attributed this rise to higher retail and other goods inflation. They anticipate overall inflation to be around 2.5% for 2024, with an average forecast of 1.5% to 2.5% for 2025.
SINGAPORE: Singapore’s inflation trends in September 2024 show a slight rise in core inflation while overall inflation declined, reflecting the ongoing moderation in consumer prices, according to a joint press release by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI).
MAS core inflation increases while overall CPI falls
MAS Core Inflation, which excludes volatile components like accommodation and private transport, rose slightly to 2.8% year-on-year (y-o-y) in September 2024, up from 2.7% in August.
This increase is largely attributed to higher retail and other goods inflation.
On a month-on-month (m-o-m) basis, MAS Core Inflation increased by 0.1%.
In contrast, the Consumer Price Index for All Items (CPI-All Items), which measures the overall price change for goods and services, eased to 2.0% y-o-y in September, down from 2.2% in August.
This decline was primarily driven by a steeper fall in private transport costs, which offset the slight rise in core inflation.
Despite the annual decline, CPI-All Items rose by 0.3% on a m-o-m basis.
Inflation outlook remains stable for the rest of 2024
Global energy prices have been volatile in recent weeks, but remain lower on average compared to the same period last year, according to the press release.
The cost of imported manufactured goods continues to decline, while services inflation is on a moderating trend.
This pattern is expected to continue through the remainder of 2024, leading to further easing of services inflation.
The report also notes that the Singapore dollar’s trade-weighted exchange rate has been gradually strengthening.
This is expected to temper imported inflation, making imported goods more affordable and helping to stabilise domestic prices.
Domestically, unit labour costs are projected to rise more slowly, thanks to moderating wage growth and productivity improvements.
The pass-through of previous increases in labour costs to consumer prices has largely peaked and is expected to slow down further in the coming months.
These factors suggest that MAS Core Inflation will likely remain on a moderating trend, with projections indicating that it will reach around 2% by the end of 2024.
Overall, core inflation is expected to average between 2.5% and 3.0% for the full year of 2024, before stepping down further to between 1.5% and 2.5% in 2025.
CPI-All Items expected to remain stable
For the entire year of 2024, CPI-All Items inflation is forecast to come in at around 2.5%.
This reflects a balance between moderating accommodation inflation and an anticipated increase in private transport inflation.
Accommodation inflation is expected to decline as leasing demand weakens, while private transport costs are projected to rise amid strong demand for cars.
Looking ahead to 2025, CPI-All Items inflation is expected to range between 1.5% and 2.5%, similar to the projected trend for core inflation.
Risks to inflation outlook remain balanced
While the inflation outlook appears stable, the press release outlines several risks that could alter these projections.
Domestically, stronger-than-expected labour market conditions could result in slower-than-anticipated reductions in unit labour cost growth, which could put upward pressure on consumer prices.
Externally, the intensification of geopolitical tensions could drive up commodity prices, particularly for energy and food, leading to higher imported costs for Singapore.
Conversely, a significant downturn in the global economy could result in greater-than-expected easing of cost and price pressures, potentially bringing domestic inflation lower than currently forecast.
MAS and MTI conclude that while these risks exist, the inflationary pressures on Singapore’s economy remain relatively balanced at this time.
