23-4-2024 (KUALA LUMPUR) Singapore’s core inflation witnessed a notable easing in March, primarily driven by slower increases in food and service prices, resulting in an overall inflation rate hitting a two-and-a-half-year low.
Core inflation, which excludes private accommodation and transport costs to provide a more accurate representation of Singaporean household expenses, dropped to 3.1 per cent year-on-year last month. This decline followed a surge to 3.6 per cent in February, spurred by Chinese New Year prices, up from 3.1 per cent in January.
The Ministry of Trade and Industry (MTI) and the Monetary Authority of Singapore (MAS), in their joint report, highlighted a 0.2 per cent drop in core inflation compared to February.
Overall inflation also slowed to 2.7 per cent year-on-year, down from 3.4 per cent in February, marking its lowest point since September 2021. This deceleration was largely attributed to reduced private transport costs, coupled with the decline in core inflation.
Month-on-month, overall inflation experienced a marginal 0.1 per cent decrease.
Both inflation indicators notably undershot market expectations, with analysts anticipating core inflation to reach 3.5 per cent and overall inflation at 3.1 per cent, according to a Bloomberg poll.
Dr Chua Hak Bin, an economist at Maybank, observed a lack of significant price shocks, citing declines in airfares and slower increases in holiday expenses and retail goods inflation, coinciding with Taylor Swift’s “The Eras Tour” in Singapore, drawing over 300,000 fans.
“Core inflation has resumed its gradual downward trend after the blip during the festive Lunar New Year month. We expect core inflation to drift down towards 2.5 per cent by the fourth quarter, opening the door for MAS to ease policy at the October meeting,” stated Dr Chua.
Earlier in April, MAS maintained its monetary policy stance, aimed at strengthening the trade-weighted Singapore dollar to mitigate inflationary pressures.
In March, private transport costs decreased as car prices and premiums for certificates of entitlement (COE) declined. Food inflation eased due to smaller increases in non-cooked food prices, while service inflation moderated with reduced airfares and holiday expenses.
MTI and MAS reaffirmed their 2024 estimates for both core and overall inflation at 2.5 per cent to 3.5 per cent, projecting lower inflation rates when excluding transitory effects.
They anticipate continued moderation in core inflation throughout the year due to declining import costs and easing domestic labour market tightness. However, they cautioned against risks to the inflation outlook, including geopolitical shocks, adverse weather events, and unexpected shifts in the global economy.
