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Headline inflation up first time in 2 years for middle, highest income

Tuesday, July 25, 2017 - 05:50

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Headline inflation for the middle- and highest-income households has risen for the first time in two years, but has been in a sustained decline since the first half of 2015 for the lowest 20 per cent of households by income group.

Singapore

HEADLINE inflation for the middle- and highest-income households has risen for the first time in two years, but has been in a sustained decline since the first half of 2015 for the lowest 20 per cent of households by income group.

Overall, headline inflation for Singapore households rose by 0.7 per cent year-on-year in H1 2017, reversing the 0.2 per cent decline in H2 2016, based on data released by the Department of Statistics on Monday.

Excluding imputed rentals on owner-occupied accommodation (OOA), the all-items consumer price index (CPI) rose by 1.9 per cent in H1 2017, higher than the 0.7 per cent increase in H2 2016.

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Among the income groups, the bottom one-fifth of households saw inflation fall by 0.1 per cent year-on-year in the first half of 2017. This came mainly from lower accommodation costs, which tend to have a bigger impact on the group's CPI, given that such costs account for a larger share of this group's total spending.

Maybank Kim Eng economist Lee Ju Ye said that while the deflationary trend continues for this income group, it has softened to -0.1 per cent, compared to -0.8 per cent in H2 2016. It seems to be bottoming out, as housing costs decline at a softer pace (-2.7 per cent in H1 2017 from -4.0 per cent in H2 2016).

Services inflation, such as healthcare and transport, have picked up for this income group, she noted.

Headline inflation for the middle 60 per cent and highest 20 per cent income groups rose by 0.6 per cent and one per cent respectively over the same period - the first increase since the second half of 2014.

Excluding imputed rentals on OOA, headline CPI for both the lowest 20 per cent and middle 60 per cent income groups rose by 1.8 per cent. The CPI for the top one-fifth of households by income rose by 2 per cent.

All income groups experienced higher food and petrol prices, as well as tuition and other fees in H1 2017. Healthcare services, road tax, electricity tariffs and parking fees also rose year on year. But accommodation costs, and bus and train fares fell for all groups.

The CPI for the top one-fifth income group rose by more than that for the middle 60 per cent income group because it saw a larger hike in car prices and had a higher expenditure share on cars. It also experienced a smaller decline in accommodation costs. Coupled with its lower expenditure share on accommodation, the top one-fifth had a smaller dampening effect on its CPI than the middle 60 per cent income group.

Ms Lee, referring to the service and conservancy charges hike in June and water price hike in July, said: "In the next six months, households can expect prices to increase gradually, supported by the cyclical recovery as well as the planned administrative price hikes."

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