Singapore August inflation falls 0.3% from a year ago, projected to rise in coming months

SINGAPORE'S consumer price index (CPI) fell 0.3 per cent in August compared to a year ago, making its smallest year-on-year decline since July 2015 when CPI fell by 0.4 per cent.

The median forecast from a Reuters survey of 12 economists was for the all-items CPI to have fallen 0.4 per cent in August from a year ago, after declining 0.7 per cent in July.

In a joint release on Friday, the Ministry of Trade and Industry (MTI) as well as the Monetary Authority of Singapore (MAS) said the smaller decline largely reflected a moderation in the fall in private road transport cost.

Private road transport cost fell by a more modest 1.0 per cent, compared to the 4.4 per cent fall in July. This was due to the expiry of the one-year road tax rebate for petrol vehicles, in addition to a smaller decrease in petrol prices.

Accommodation cost fell by 3.6 per cent, similar to the previous month, reflecting the continued softness in the housing rental market.

Services inflation edged up to 1.7 per cent, from 1.6 per cent in July. Public road transport cost increased by 0.9 per cent, compared to a decline of 0.8 per cent in July, given the low base in August last year, when public transport operators provided free bus and train services on National Day in conjunction with the SG50 celebrations.

Food inflation eased slightly to 2.0 per cent in August, from 2.1 per cent in July. This was due to a smaller increase in the cost of non-cooked food which more than offset the stronger pickup in the price of restaurant meals.

Inflation as measured by CPI less imputed rentals on owner-occupied accommodation rose to 0.6 per cent in August from 0.1 per cent a month earlier, mainly on account of the smaller contraction in private road transport cost.

MAS Core Inflation came in at 1.0 per cent, unchanged from July as higher services inflation offset the more modest increase in food prices. It is expected to pick up gradually over the course of the year as the disinflationary effects of oil as well as budgetary and other one-off measures ease.

However, the pace of increase in MAS Core Inflation will be restrained by the weak external price outlook, subdued economic growth prospects, and the reduction in labour market tightness.

For 2016, MAS Core Inflation is likely to average around 1 per cent. CPI-All Items inflation has troughed in Q2, and is projected to rise in the coming months.

Private road transport cost is anticipated to increase, even as housing rentals continue to dampen overall inflationary pressures. For the year as a whole, CPI-All Items Inflation is forecast to come in at minus 1.0 to 0.0 per cent.