This marks the first moderation in core inflation since February, reflecting smaller price increases in key sectors.
SINGAPORE: Core inflation in Singapore has eased to 5.1% in October, a notable decline for the first time since February this year. The slight moderation from September’s 5.3% is attributed to smaller increases in the prices of electricity, gas, retail, and other goods and services, according to official data released on Wednesday (Nov 23).
Core inflation excludes costs related to accommodation and private transport. The overall inflation rate, or headline consumer price index, registered at 6.7% year-on-year in October, down from 7.5% in the previous month. This decrease was primarily driven by easing private transport inflation, alongside the moderation in core inflation.
The Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) project that core inflation will remain elevated over the next few quarters before showing a more discernible decline in the second half of 2023. This is expected as the current tightness in the domestic labor market eases and global inflation trends stabilize.
For the entirety of 2022, overall inflation is anticipated to average around 6%, with core inflation expected to average about 4%. Notably, overall inflation has moderated across nearly all broad categories, except for accommodation and food.
Private transport inflation decreased to 17.3% year-on-year in October, reflecting a slower rate of increase in car and petrol prices. Conversely, food inflation saw a slight rise to 7.1% in October due to higher costs in food services.
Electricity and gas inflation fell to 19% year-on-year in October from 23.9% in September, driven by smaller tariff increases. Additionally, retail and other goods inflation decreased to 2.6% in October as the price increases for clothing, footwear, and personal care products slowed. Services inflation also dipped to 3.9%, with smaller increases recorded in holiday expenses and recreational services. Accommodation inflation remained unchanged from September at 4.9%, as housing rents held steady.
Looking ahead, the MAS and MTI highlighted that demand conditions in major economies are softening while supply chain disruptions continue to ease. Prices for energy and food commodities have receded from their peak earlier this year but remain elevated due to ongoing supply constraints.
Wage pressures persist amid tight labor markets in major advanced economies, contributing to Singapore’s imported inflation across various goods and services. Domestic unit labor costs are expected to rise further in the near term alongside robust wage growth, and utility costs are likely to stay elevated.
Firms are anticipated to pass on accumulated costs—stemming from imports, labor, and other business expenses—to consumers, amidst resilient demand. In addition, increases in car and accommodation costs are expected to remain firm in the upcoming quarters due to tight COE quotas for vehicles and strong demand for rental housing.
For 2023, considering various factors including the impending Goods and Services Tax (GST) hike, Singapore’s headline inflation is projected to average between 5.5% and 6.5%, while core inflation is expected to range from 3.5% to 4.5%. Excluding the transitory effects of the GST increase, headline and core inflation forecasts are estimated at 4.5% to 5.5% and 2.5% to 3.5%, respectively.
The authorities caution that there are upside risks to the inflation outlook, stemming from potential fresh shocks to global commodity prices and more persistent external inflation pressures.
