Singapore inflation higher in January after GST hike; headline at 6.6%, core at 5.5%

SINGAPORE’S inflation rose across the board in January, but came in slightly under economist estimates, data from the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) showed on Thursday (Feb 23).

In the first month of 2023, headline inflation edged up to 6.6 per cent year on year, from 6.5 per cent in the previous month, due to higher accommodation inflation and core inflation, partially offset by easing private transport costs.

Core inflation, which excludes accommodation and private transport, rose to 5.5 per cent year on year, from 5.1 per cent in December 2022. This was driven by higher inflation for services, food and retail and other goods, along with the increase in the goods and services tax (GST) rate.

“The month-on-month step-up in core inflation for January, due in part to the one-off increase in price levels following the GST hike, was expected,” said the ministries. MAS core inflation is expected to stay above 5 per cent year on year in the first quarter, as previously projected, they added.

Private-sector economists expected a higher rate of headline inflation at 7.1 per cent, and a higher rate of 5.7 per cent for core inflation, going by median estimates in a Bloomberg poll.

The authorities maintained their inflation outlook for 2023, with headline inflation expected to average 5.5 to 6.5 per cent and core inflation, 3.5 to 4.5 per cent.

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Similar to the previous month, imported inflation is expected to remain firm, on the back of continued elevated energy and food commodities prices and tight labour markets. Domestically, unit labour costs are projected to rise further, alongside robust wage growth in the near term. Utility costs will likely remain high, and car and accommodation price increases will stay firm.

Economists agreed that another off-cycle monetary policy tightening is unlikely. But some, including OCBC chief economist Selena Ling and Maybank economists Chua Hak Bin and Lee Ju Ye, believe that it may occur at MAS’ April meeting.

Overall, consumer price index picked up for most categories in the first month of 2023, with the exception of electricity and gas, and private transport.

Services inflation grew to 4.2 per cent, against 3.7 per cent in December, on the back of stronger price increases for outpatient services and tuition and other fees. Cost of telecommunication services rose for the first time since June 2021, Chua and Lee noted, while airfares reversed December’s decline.

On the bread and butter front, food inflation came in higher at 8.1 per cent, compared with 7.5 per cent in the preceding month, on account of a steeper increase in the price of prepared meals.

Accommodation inflation “accelerated to the fastest pace since May 2013”, the Maybank team noted, to 5 per cent from December’s 4.7 per cent, as housing rents recorded a larger increase.

For retail and other goods, inflation was up at 3.3 per cent, from 2.8 per cent previously, due to a faster pace of increase in the prices of clothing and footwear, household durables, and alcoholic drinks and tobacco.

Bucking the trend was electricity and gas inflation, which dropped to 11.5 per cent on year from 16.5 per cent in the previous month, driven by smaller rises in electricity and gas tariffs.

Also easing was private transport inflation, at 14.3 per cent on year from 15.5 per cent in December, as car and petrol prices rose more slowly.