23-10-2023 (SINGAPORE) Singapore’s core inflation declined to 3 percent year-on-year in September, continuing a downward trend from 3.4 percent in August. This drop can be attributed to reduced inflation in food and retail, among other goods, according to the Ministry of Trade and Industry (MTI) and the Monetary Authority of Singapore (MAS). The last time core inflation was below 3.0 percent was in March 2022, when it stood at 2.9 percent. Earlier this year, core inflation had reached a 14-year high of 5.5 percent in January and February.
Core inflation, which excludes accommodation and private transport costs, has been moderating due to various factors. Overall inflation increased slightly to 4.1 percent year-on-year in September, up from 4.0 percent in the previous month, mainly due to private transport inflation offsetting declines in core and accommodation inflation.
Food inflation dropped to 4.3 percent in September as prices of non-cooked food and prepared meals rose more slowly. Retail and other goods inflation fell to 0.9 percent, with clothing, footwear, and personal effects prices declining, while personal care and medical goods saw slower price increases. Accommodation inflation eased from 4.4 percent to 4.3 percent as the pace of housing rent increase moderated.
Electricity and gas costs in September remained the same as in August, falling at -1.4 percent due to a slight decrease in electricity prices offset by a more significant drop in gas prices. Services inflation remained steady at 3.1 percent, as an increase in telecommunication service costs was balanced by smaller rises in holiday expenses.
Private transport inflation surged from 6.3 percent to 8.5 percent in September, primarily due to car prices and petrol costs.
The outlook suggests that core inflation will continue to moderate over the next few months, aided by low imported costs compared to the previous year and reduced tightness in the domestic labor market. However, early 2024 might see an impact from the one percentage point increase in the GST rate, followed by a broader moderating trend over the year.
Headline inflation for 2023 is expected to average around 5 percent, while core inflation should be around 4 percent. In 2024, both headline and core inflation are projected to range between 3 percent to 4 percent and 2.5 percent to 3.5 percent, respectively, excluding the transitory effects of the GST increase.
Singapore’s core inflation is expected to fall to between 2.5 percent and 3.0 percent year-on-year by December, despite potential volatility in electricity and gas prices. The stronger Singapore dollar, along with reduced costs in food commodities and manufactured goods, is expected to keep import cost pressures in check. On the domestic front, higher Certificates of Entitlement (COE) premiums may contribute to rising overall inflation, with private transport inflation slowing down alongside an expected increase in COE quotas.
However, there are both upside and downside risks, including geopolitical conflicts affecting energy and food prices, labor market tightness, and global economic slowdown, which could impact cost and price pressures.
