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The BT Fa Cai Index: a more expensive CNY
COMPLAINTS about Chinese New Year spending getting more expensive is something that many are probably familiar with. So are we.
The Business Times has compiled its inaugural BT Fa Cai index to provide a picture of what the damage is like each passing year.
First, the bad news: The Year of the Horse may bring good fortune, but it could also saddle Singaporeans with the steepest increase in festive food prices in three years.
The good news: Wages have moved in tandem, and look set to outpace Chinese New Year inflation.
We tracked the average price of an equally weighted basket of four popular festive items - mandarin oranges, beer, abalone and bak kwa - in the weeks before each Chinese New Year.
With 2010 prices normalised to 100, the same basket of goods costs 115 this year. Against year-ago prices, 2014's basket costs 4.32 per cent more, the largest annual increase since 2011.
The question of affordability is more complex. Comparing against nominal wages, the index outpaced incomes over a two-year period between 2010 and 2012. On just a one-year basis, the 2012 basket actually grew slower than wages, but that was partly because the basket was coming off an unusually high base in 2011.
But some relief could be due. Current forecasts of wages for 2013 and 2014, gathered from polling economists, suggest that incomes could rise faster than the index for those years, both against 2010 levels and year-on-year. The wage comparisons are, of course, based on averages, so affordability is likely to be different for most Singaporeans.
The measured foods were chosen based on price availability and the ability to make year-on-year comparisons. But buyers beware: prices fluctuate significantly within the festive period, and our data-limited sample size is by no means comprehensive, so the index could have a significant margin of error.
Nevertheless, we hope it provides a useful snapshot on how much food (or drink) your dollar gets with each passing year.
Leading the charge this year were mandarin oranges, where prices rose over 15 per cent from last year. Sheng Siong supermarket told BT that a reduced supply of large-sized oranges this year could be a reason for the rise. Mandarin oranges were smaller this year, with a lower harvest, it said.
A box of 18 oranges now costs an average of $7.05. The same amount would have bought 27 oranges in 2010. Higher costs have played a part in this trend of rising mandarin prices since 2010, said Tay Khiam Back, chairman of the Singapore Fruits and Vegetables Importers and Exporters Association. Packaging, local transport, as well as labour costs in both China and here, have increased since then, he said.
Bak kwa and abalone suppliers echoed a similar dilemma.
Rod Lim, owner of Lim Chee Guan, said labour costs were "heavy".
Prices for sauces and sugar have been increasing over the years as well, he said. "Prices go up a few times and come down one time."
Bak kwa prices on the index rose marginally this year to $49.92. Compared with 2010, however, the bill now is 9.3 per cent higher.
Similarly, Goh Kai Kui, chief executive officer of Goh Joo Hin Pte Ltd, the company managing and distributing the New Moon brand, said they saw around a 3-4 per cent increase in operating costs annually in terms of logistics and labour. The company tries to offset this by increasing efficiency, encouraging their customers to have more goods sent per delivery to cut the number of trips made.
Human factors aren't the only influence on prices. Mother Nature also has her say.
Tough abalone harvesting weather, bushfires in Australia that raise animal feed prices and dry spells that shrink mandarin harvests are all examples of weather wreaking havoc, industry players said.
Weather was a contributing factor behind the 10 per cent spike in the index in 2011 as well. Prices across the four items increased in varying measure that year. According to Mr Song, a La Nina episode between end-2010 and early 2011 made it wetter than normal. Coupled with a rise in global demand, it contributed to increasing prices.
In that year, higher palm oil prices also caused the significant price rise. "Palm oil prices rose from RM2,500 to RM3,500 (S$960 to S$1,344) a tonne, making new year items more expensive," said Mr Song. In the United Nations' global food price index, food prices worldwide soared 23 per cent in 2011, similar to the trend seen here.
Since then, global food prices have remained more stable, with drops in 2012 and 2013 for the UN index. Mr Song said: "We may have the occasional haze, but, by and large, the global weather has been well behaved."
Domestic price pressures were the likely reason for 2014's spike, and could be a trend towards the future, Mr Song said. "The tightening of the foreign labour market and the introduction of the progressive wage model would likely feed through with a higher cost of food and services beyond the seasonal demand."
The volume demanded is unlikely to change as the price rise is fairly marginal, Mr Song said. "People will complain but they won't change their behaviours much, as wages see a similar rise as well."
Meanwhile, celebrations at Qian Hu Corporation will take a different turn this year. While the company used to have sit-down dinners, managing director Kenny Yap is opting for a buffet celebration instead, with the food cooked on the spot.
Mr Yap said that, while cheaper, the quality of the food is not compromised, and a buffet style dinner will improve interaction. "It's not how much money you spend, but how you spend the money and how well you enjoy the process that really matters," he said.