Singapore's headline inflation surprises on upside at 3.8% in Nov, highest since Feb 2013

SINGAPORE'S headline inflation rose to 3.8 per cent in November, exceeding economists' expectations of 3.4 per cent and beating October's previous high of 3.2 per cent, Department of Statistics (Singstat) consumer price index (CPI) figures showed on Thursday (Dec 23).

The new reading prompted the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) to revise their full-year estimates, though official forecasts for 2022 did not budge.

Driven by stronger private transport inflation of 17.9 per cent, November's headline inflation was the highest since February 2013, when it was 4.9 per cent. Accommodation inflation rose to 2.7 per cent, from 2.5 per cent the month before.

Core inflation, which excludes accommodation and private transport, edged up to 1.6 per cent, above the 1.5 per cent figure that was both October's reading and economists' median estimate.

This mainly reflected a rise in services inflation to 1.9 per cent, from 1.6 per cent the month before, said the MAS and MTI.

Retail and other goods was the only category to see prices fall, with inflation at -0.9 per cent, a sharper decline than October's -0.4 per cent figure.

Inflation also rose for electricity and gas, at 10 per cent, up from 7.8 per cent before; and food, at 1.9 per cent, up from 1.7 per cent before.

With just 1 month of the year left, the MAS and MTI raised the official 2021 full-year forecast to 2.3 per cent for headline inflation, up from "around 2 per cent" before.

This is given "the sharp rise in private transport costs in recent months due to higher COE (certificate of entitlement) premiums", they said.

They also narrowed the full-year core inflation forecast to 0.9 per cent, compared to a previous forecast of "near the upper end of the 0 to 1 per cent".

But they maintained their official forecasts for 2022, with core inflation to be between 1 and 2 per cent, and headline inflation to average 1.5 to 2.5 per cent.

UOB economist Barnabas Gan similarly upgraded his 2021 headline inflation outlook to 2.3 per cent, up from 2.0 per cent previously, but kept his core inflation outlook at 1 per cent. The official revised estimate for headline inflation implies a 3.9 per cent rate in December, he noted.

For 2022, he sees Singapore's inflation outlook as dependent on global commodity prices, with further upside risks from firmer demand for commodities and input materials as economic activity picks up across Asia.

Most Singstat expenditure categories, distinct from the MAS and MTI categories, saw prices rise year on year in November.

The exceptions were clothing and footwear, down 6.6 per cent; communication, down 1.2 per cent; and miscellaneous goods and services, down a marginal 0.1 per cent.

The MAS and MTI's outlook remained largely the same from the previous month's release. They expect global inflation to remain elevated for some time, with crude oil prices supported by tight supply conditions and firm demand. Also expected to continue are supply-demand mismatches in various commodities and goods markets, and bottlenecks in global transportation.

At home, the labour market recovery is expected to become more entrenched, and wages will continue to rise at a steady pace. "As the domestic Covid-19 situation stabilises, consumer demand should strengthen, with the possibility of a greater pass-through of accumulating business costs to consumer prices," they said.

Headline inflation is likely to be supported by accommodation inflation, which should stay firm amid construction delays, MAS and MTI added. But private transport inflation is likely to moderate next year, with a slower pace of increase in COE premiums and petrol costs.

READ MORE:

• As lagging sectors close recovery gap in 2022, inflation could be new risk
• Singapore's headline inflation rises to 3.2% in October, highest in over 8 years