Singapore’s core inflation falls to -0.2% in January as service costs fall

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SINGAPORE: Consumer prices in Singapore fell in January, albeit at a slower pace, as authorities forecast a “slightly positive” turn this year.

Core inflation fell to -0.2% yoy in January from -0.3% in December last year, data from the Monetary Authority of Singapore (MAS) showed on Tuesday and of the Ministry of Commerce and Industry (MTI). (February 23).

The slower decline in January was due to lower costs for services.

Service costs fell -0.3 percent in January, mainly due to higher tuition and other fees and the costs of point-to-point transportation services.

Core inflation excludes the price of private transport and accommodation.

The headline consumer price index (CPI), or headline inflation, rose to 0.2% in January, from 0% in December, due to the pickup in core inflation and rising prices. private transportation and accommodation costs.

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DROP IN SERVICE FEES

In January, the cost of services fell by -0.3 percent, compared to -0.8 percent in December.

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Falling service costs were also driven by a “more moderate rate of decline” in vacation spending, MAS and MTI said. However, most of the CPI components of vacation expenses were imputed using the overall change in headline inflation since they are not available for consumption due to restrictions on international travel.

Food inflation fell to 1.5 percent in January from 1.6 percent in December, as prices for uncooked food and restaurant meals rose at a more moderate pace.

The cost of electricity and gas fell more to -9.7 percent in January, from -6.7 percent in December, due to a steeper drop in electricity prices with the downward revision of the electricity tariff.

“On an annual basis, the electricity tariff fell 14.4 percent in January, a faster rate of decline than the 8.5 percent drop the month before,” MAS and MTI said.

The cost of retail trade and other goods fell at a slightly faster pace, from -1.2% in December to -1.3% in January, mainly due to larger declines in the prices of consumer goods. personal care and clothing and footwear.

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Private transportation costs fell to 1.9 percent in January from 1.2 percent the previous month due to a larger increase in car prices and a more modest drop in gasoline prices.

Housing inflation also accelerated by 0.5% in January, from 0.3% in December, as housing rents rose faster as rental discounts expired for households living in public rental apartments. .

“Households living in public rental apartments received rental discounts of 50% from October 2020 to December 2020 as part of government measures to help households cope with the economic impact of the pandemic,” said the agencies.

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EXTERNAL INFLATION LIKELY TO CONNECT

MAS and MTI said external inflation is expected to pick up in the coming quarters amid an expected recovery in global oil prices. However, the size of the increase will be capped by persistent negative output gaps among Singapore’s major trading partners.

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“On the home front, cost pressures are expected to remain low as wage growth and commercial rents are expected to remain weak,” the agencies said, adding that some components of domestic service inflation may also gradually increase, parallel to the economic recovery. .

For the year, core inflation is expected to turn slightly positive this year, “as the expected year-over-year increase in oil prices leads to a pickup in electricity and gas prices and the disinflationary effects of government subsidies introduced. in 2020 are fading, ”said MAS and MTI.

Meanwhile, accommodation costs have stabilized, with housing rents in some areas registering increases. Private transportation costs have increased due to firm demand for cars and rising gasoline costs.

Core inflation this year is expected to average between 0% and 1%, while headline inflation is expected to be between -0.5% and 0.5%.

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