Food, healthcare inflation hit poor hardest

A CLOSER look at Singapore's latest inflation numbers reveals how the lower-income segment of the population might be bearing the brunt of price increases. Core inflation rose 2.2 per cent year-on-year in July - an elevated but still manageable number on the whole. Headline inflation, which includes transport and housing, at 1.2 per cent was lower than market expectations. But not everyone experienced such benign inflation. The reason is that the consumer price index (CPI), on which we base our national inflation estimates, is simply our best guess at how much a typical household's typical consumption would typically cost. Of course, most people are not typical. Different households with different income levels consume different quantities and different types of goods and services.

According to the latest official data on CPI based on income groups, the poorest-earning 20 per cent of households allocate more of their total expenditure to food than the rest of the country. To be exact, a household with income falling within the bottom 20 per cent spends about S$27 out of every S$100 spent on food, compared to S$24 out of S$100 for the middle 60 per cent of earners and just S$18 per S$100 for the top 20 per cent of earners. Health care is another area where the lowest income earners spend proportionately more - over S$7 per S$100 for the bottom 20 per cent versus less than S$6 per S$100 for the middle 60 per cent and the top 20 per cent.

The bad news for the lowest-income households was that food and healthcare prices were two of the three most inflated CPI components in July as well as year-on-year over the January-to-July period. That means inflation in those areas hit the poorest segment of the population more than the wealthiest. Costlier necessities was not the only thing that went against the lowest-income segment. Education prices have also been one of the fastest climbers in the CPI. The problem with education prices rising so quickly is that it limits the upward mobility of the poorest and threatens the meritocracy model to which Singapore subscribes. Transportation prices also fell year-on-year in July, and was the slowest inflating component of the CPI over the year-on-year January to July period. But with subdued car prices and certificates of entitlement the main cause for the drop, it was the wealthier households that benefited the most from the modest inflation in transportation.