Domestic price pressures raise Singaporeans' inflation expectations

DOMESTIC pass-through price pressures have pushed up both the headline inflation rate (CPI-All Item) and core inflation rate expectations for the first time since September 2012.

The one-year-ahead inflation expectations of Singapore households has inched up to 3.73 per cent, going by the research findings of the latest quarterly survey for Singapore Index of Inflation Expectations (SInDEx) by the Singapore Management University (SMU). In June 2014, the one-year-ahead headline inflation was 3.66 per cent.

Compared to the historical average of 4.16 per cent and the second quarter average of 3.79 per cent, the current one-year-ahead headline inflation expectations shows that Singapore households are a little wary of possible price increases on essential items due to pass-through costs despite significant drop in current inflation rates.

Following the overall headline inflation, the one-year-ahead Singapore core inflation expectations (excluding accommodation- and private transportation-related costs) edged up to 3.95 per cent in September, from 3.85 per cent in June, reflecting an apparent end to the downward trend since Sept 2012.

For a sub-group of the population who own their accommodation and use public transport, the one-year-ahead Singapore core inflation rate was 3.83 per cent in the Sept survey, up from 3.81 per cent in June.

One-year-ahead SInDEx1, the composite weighted index of one-year-ahead inflation expectations, maintained an overall downward trend to 3.84 per cent, continuing its sub-4 per cent value since June 2013 and lower than its historical average of 4.2 per cent.

SInDEx1 puts lower weightage on more volatile components like accommodation, private transportation, food and energy expenses, so it is expected to be more stable than the all-inclusive headline inflation expectations.

Read more: Singapore lowers official inflation forecast for 2014