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Singapore Consumer Prices Decline in Longest Slump on Record

  • Consumer prices decline for 17th consecutive month in March
  • Central bank eased monetary policy to help support growth

Singapore’s consumer prices fell for a 17th consecutive month in March, the longest period of decline on record, reflecting the impact of lower oil costs and a weakening economy.

Consumer prices dropped 1 percent from a year earlier as transport and housing costs fell further, the statistics agency said in a statement on Monday. That compares with a previously reported 0.8 percent fall in February, and the median estimate for a 1 percent decline in a Bloomberg News survey of 20 economists. Core inflation, which excludes private transport and accommodation costs, was at 0.6 percent last month.

The record price slump is the latest sign of a sputtering economy. Gross domestic product growth was flat on an annualized basis in the first quarter compared with the previous three months, the trade ministry said earlier this month, just as the Monetary Authority of Singapore unexpectedly eased its policy stance, adopting an approach last used during the 2008 global financial crisis.

“The slump in oil prices is certainly one of the key factors for the negative inflation,” DBS Group Holdings Ltd. said in a research note before the data release. “But the slowdown in growth momentum and the impact of earlier macro-prudential measures on housing and car purchases are also having significant impact on the headline number.”

Inflation Outlook

DBS is estimating an average decline of 0.2 percent in consumer prices in 2016. The central bank said in its Monetary Policy Statement on April 14 that core inflation should pick up “more gradually” over the year than previously forecast.

“Core inflation is expected to pick up gradually over the course of the year, as the disinflationary effects of oil as well as budgetary and other one-off measures ease," the central bank and trade ministry said in a statement accompanying the inflation report. “However, the increase in core inflation will be milder than earlier expected, given the weaker external price outlook, subdued growth prospects, and a reduction in labor market tightness."

For the whole of 2016, core inflation is likely to be in the lower half of the 0.5 percent to 1.5 percent forecast range, barring a sharp rise in global oil prices, the authorities said. Car prices and housing rentals will continue to dampen overall inflationary pressures, and headline inflation will probably remain negative throughout 2016 to average -1 percent to 0 percent for the whole year, they said.

Rentals across the city-state’s home, office and retail properties dropped in the quarter ended March, with demand weakening partly because of curbs on immigration, data released last week by the Urban Redevelopment Authority showed. The home rental index dropped 1.3 percent in the three months ended March 31 from the previous quarter, while office rentals slid at a faster pace, falling 2.1 percent, the agency said.

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