Singapore’s core inflation drops to 2.1 per cent, lowest in nearly three years

Singapore’s core inflation dropped to 2.1 per cent year-on-year in October 2024, marking its lowest level since December 2021.

This represents a significant decrease from September’s 2.8 per cent, largely attributed to moderated inflation across services, electricity and gas, and retail goods, the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) announced on 25 November.

Headline inflation, which includes accommodation and private transport, also eased from 2 per cent in September to 1.4 per cent in October. On a month-on-month basis, core inflation decreased by 0.3 per cent in October.

The decline was driven by slower accommodation inflation and a sharper fall in private transport costs.

Sector-specific trends

Services inflation fell sharply to 2.3 per cent in October from 3.3 per cent in September, due to smaller increases in holiday expenses and healthcare service costs. Electricity and gas inflation dropped to 2.5 per cent, down from 6.3 per cent, as price hikes for these utilities slowed.

Retail and other goods inflation saw a decline from 0.8 per cent in September to just 0.1 per cent in October. This was primarily due to larger decreases in clothing and footwear prices, alongside falling costs for medicines and health products. Food inflation, however, remained steady at 2.6 per cent, with prices of non-cooked food and food services rising at similar rates across September and October.

Accommodation inflation edged down to 2.5 per cent, a slight reduction from 2.7 per cent in September, due to smaller increases in rental prices. Private transport costs fell marginally faster, from -2.4 per cent in September to -2.5 per cent in October, as car prices continued to decline.

Economic outlook

MAS and MTI expect core inflation to remain around 2 per cent through the end of 2024.

For the full year, core inflation is projected to average between 2.5 and 3 per cent, before moderating further to 1.5 to 2.5 per cent in 2025. Overall inflation is forecast to average 2.5 per cent in 2024 and ease further to a range of 1.5 to 2.5 per cent the following year.

“Although global energy prices have been volatile in recent weeks, they remain lower than levels seen a year ago,” MAS and MTI noted.

A stronger Singapore dollar and easing global inflation trends are also expected to reduce imported price pressures. Domestically, slower unit labour cost growth and improved productivity are likely to further ease inflation in the coming year.

Services inflation, which has already shown signs of slowing, is expected to decline further in 2024. Accommodation inflation is also forecast to soften next year, helping to offset an anticipated rise in private transport costs driven by robust demand for cars.

Risks to inflation

MAS and MTI highlighted a balanced outlook for inflation risks. Stronger-than-expected labour market conditions could slow the easing of labour cost growth, potentially sustaining inflationary pressures.

Conversely, heightened geopolitical tensions could lead to increased commodity prices, raising imported costs. On the other hand, a significant downturn in the global economy could result in greater easing of cost pressures, pushing inflation lower than anticipated.