Singapore core inflation slips to 1.7% in November, below economists' estimates

SINGAPORE saw both core and headline inflation easing year-on-year in November, according to the Department of Statistics consumer price index (CPI) release on Monday.

Core inflation, which strips out the cost of accommodation and private road transport, was 1.7 per cent.

This was below both October's figure and economists' expectations, both of which were 1.9 per cent.

Headline inflation also eased to 0.3 per cent, down from 0.7 per cent the previous month and lower than economists' expected 0.6 per cent. This mainly reflected a steeper fall in private road transport costs. These fell 3.6 per cent in November, steeper than October's 0.6 per cent decline, due to lower car prices and Certificate of Entitlement premiums, as well as a smaller rise in petrol prices.

Services inflation was 1.2 per cent, down from 1.4 per cent, as a larger decline in telecommunication services fees and a more modest increase in holiday expenses outweighed a stronger pickup in recreational and cultural services fees. Retail inflation was 1.1 per cent, down from 1.3 per cent, while food inflation held steady at 1.4 per cent.

Electricity and gas costs rose at a slower pace of 15.4 per cent in November, compared to 16.6 per cent in October, reflecting the Open Electricity Market's phased nationwide launch's effect on electricity prices.

External sources of inflation have increased in recent quarters, with global oil prices higher year-on-year and inflation for non-oil imports having picked up, said the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI).

Domestically, the improving labour market should also underpin faster wage growth in 2018 and 2019, compared to 2017, with the unit labour cost for services seeing faster growth recently. Said the MAS and MTI: "As domestic demand strengthens further, there could be a greater pass-through of higher import and labour costs to consumer prices. However, the extent of overall price increases will be capped by greater market competition in several consumer segments, such as telecommunications, electricity and retail."

MAS and MTI maintained their outlook, saying that core inflation is expected to rise modestly in coming months, coming in within the forecast range of 1.5 to 2 per cent in 2018, and 1.5 to 2.5 per cent in 2019. Headline inflation is projected to be 0.5 per cent in 2018, picking up to 1 to 2 per cent in 2019 as the drag from accommodation and private road transport costs lessens.