Singapore inflation holds steady in November, with core at 5.1% and headline at 6.7%

SINGAPORE’S inflation stayed steady across the board in November, as the smaller increase in energy prices helped to offset rising prices of retail and other goods, data from the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) showed on Friday (Dec 23).

Headline inflation was unchanged from the previous month at 6.7 per cent year on year, with most broad categories seeing prices hold steady last month.

Core inflation, which excludes accommodation and private transport, also stayed at the same as October’s level at 5.1 per cent year on year.

Still, these numbers were a notch higher than what private-sector economists had predicted, according to a Bloomberg poll. They had expected headline inflation to come in at 6.5 per cent and core inflation at 5 per cent.

Accommodation inflation dipped 0.1 percentage point to 4.8 per cent year on year in November as housing rents rose at a more gradual pace, MAS and MTI noted.

Similarly, private transport inflation also dropped 0.1 percentage point to 17.2 per cent year on year, in line with smaller increases in car and petrol prices.

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Services inflation in November was 3.6 per cent year on year, down from 3.9 per cent in the previous month, due mainly to a smaller rise in airfares.

Electricity and gas inflation saw the biggest fall in November, coming in at 16.7 per cent year on year, compared with 19 per cent in the previous month.

MAS and MTI said this is partly due to the higher base a year ago. They noted that some households, whose Open Electricity Market retailers had exited the market in November, had to pay higher electricity costs after they were transferred to SP Group due to the higher regulated tariff.

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Bucking the trend were price increases for food as well as retail and other goods.

Food inflation came in at 7.3 per cent year on year, whereas retail and other goods saw a 3.3 per cent year-on-year inflation in November.

The authorities said the latter was due to steeper increases in the price of clothing and footwear, personal care products, as well as medicines and health products.

DBS senior economist Irvin Seah said the elevated inflation for food and retail and other goods is due to a combination of factors, including pent-up demand and the lead-up to the festive season.

He added that some consumers may also be front-loading their purchases in anticipation of the one-percentage point hike in the goods and services tax (GST) to 8 per cent from January.

With just one more month to go, the authorities have kept their 2022 full-year forecast for headline inflation and core inflation at 6 per cent and 4 per cent respectively.

Year-to-date headline inflation is currently at 6.1 per cent, while that for core inflation is at 4 per cent.

MAS and MTI have also kept their 2023 forecast unchanged at 5.5 to 6.5 per cent for headline inflation and 3.5 to 4.5 per cent for core inflation.

The authorities have also kept their outlook statement the same as the previous month, warning of increasing unit labour costs, pass-through costs from firms, as well as elevated car and accommodation costs.

The statement reiterated that core inflation is expected to stay elevated in the next few quarters before slowing more discernibly in the second half of 2023, as the current tightness in the domestic labour market eases and global inflation moderates.

Analysts said November’s data further indicate that underlying inflationary pressures have peaked.

“But by January, inflation could spike up, back to about 7 per cent because of the GST (hike), but that is a policy effect,” said DBS’ Seah.

He added that the concern is whether this would result in a second-order impact, although he said it might be unlikely with growth momentum slowing.

OCBC chief economist Selena Ling said November’s number should offer “modest relief” and dampen the need for any off-cycle move speculation ahead of the central bank’s scheduled Monetary Policy Statement in April.

This is even as the official language suggests continued caution on core inflation staying elevated in the next few quarters before subsiding in H2 2023, she added.

But Barclays regional economist Brian Tan believes the risk of an off-cycle tightening is “still significant” as it may be a pre-emptive one to quell any increase in inflation expectations arising from the GST hike.