Singapore Consumer Prices Rise for First Time Since 2014

Consumer prices in Singapore rose in December for the first time in more than two years, adding to signs of recovery in the city-state’s economy.

Key Points

  • CPI rose 0.2 percent from a year earlier, compared with unchanged prices in November. The median estimate of 16 economists in a Bloomberg survey was for a 0.1 percent gain
  • Prices increased 0.2 percent in the month
  • Core inflation, which excludes costs of accommodation and private road transport, rose 1.2 percent in December from a year earlier, in line with the median forecast

Big Picture

Lower oil costs and government measures to rein in property values have driven consumer prices down in the trade-dependent economy since November 2014. The Monetary Authority of Singapore, which uses the exchange rate as its main policy tool rather than interest rates, had forecast a pick-up in inflation to between 0.5 percent to 1.5 percent this year. That may give it reason to stick to its neutral policy stance at its next scheduled meeting in April at a time when exports are starting to grow.

Experts’ Takeaways

  • The CPI increase was “on the back of rising petrol prices,” said Jonathan Koh, an economist at Standard Chartered Plc in Singapore. “In 2017, we expect prices to continue to pick up” to average 1.1 percent. The data is “in line with what the MAS has forecast,” he said. “At the moment, we don’t expect any changes in MAS policy.”
  • “On the external front, imported inflation is likely to rise modestly on the back of a turnaround in global commodity markets,” the MAS and Ministry of Trade and Industry said in a joint statement. “Domestically, overall cost pressures should be muted. Amid a pullback in hiring, conditions in the labor market have slackened. This will cap underlying wage growth, even as non-labor business costs have eased.”

Other Details

  • Food prices, which make up about 22 percent of the consumer price basket, rose 2 percent in December from a year earlier
  • The biggest rise in prices on an annual basis was for education, which increased 3.2 percent
  • The MAS and MTI see core inflation averaging 1 percent to 2 percent this year, compared with 0.9 percent in 2016, though the pick-up will be gradual because of a lack of demand pressures
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