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Disinfla...Defla...Things don't cost as much overall

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The big economic news this week is that the Singapore headline CPI slipped in November, the first decline in five years. But the economists are all going out of their way to stress that this does not mean Singapore is in a deflationary environment.

And there's a good reason for that. To begin with, core inflation, which excludes private road transportation and accommodation prices, is still comfortably in positive territory. Core inflation is perhaps a better gauge of the long-term cost-of-living trend, because it ignores relatively short-term and more volatile items. November's CPI is a good example of the difference. The headline numbers are down partly because of a base effect; the certificate of entitlement (COE) for smaller cars in November 2013 was close to all-time highs, and in November 2014 the Category A COE premium had eased about 10 per cent from those lofty levels. Property prices have also come down.

It's also interesting to see economists try to explain this. Yes, deflation means falling prices, yes, prices were down in November, but it's not deflation. No, really, it's not. It's...it's complicated.