The Monetary Authority of Singapore (MAS) says MAS Core Inflation is projected to remain elevated in the next few quarters before slowing “more discernibly” in the second half of 2023.
“[This is] as the current tightness in the domestic labour market eases and global inflation moderates,” says the central bank in a statement released jointly with the Ministry of Trade and Industry (MTI) on Oct 25.
Singapore’s CPI-All Items inflation rose by 7.5% y-o-y in September, unchanged from August’s headline figure. According to MAS and MTI, the unchanged headline inflation remained the same as higher core and accommodation inflation were offset by lower inflation within the private transport sector.
However, MAS Core Inflation, which doesn’t include private transport and accommodation inflation, rose to 5.3% y-o-y from 5.1% in August. This was due to the larger increases in the prices of food, services and retail & other goods.
Prices of food rose as prices of food services and non-cooked food increased at a faster pace. Meanwhile, accommodation inflation increased along a faster pace of increase in housing rents.
Services inflation stood higher due to the higher increases in the cost of point-to-point transport services and holiday expenses. At the same time, telecommunication services fees saw a smaller decline in September.
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Retail & other goods saw an increase in inflation due to the sharper increase in the prices of telecommunication equipment, medicines & health products and other personal care products.
Electricity & gas inflation remained unchanged from that in August.
Private transport inflation saw a moderation due to a slower pace of increase in car and petrol prices.
On a m-o-m basis, headline and core inflation increased by 0.4% and 0.5% respectively.
Further to its statement, MAS and MTI says Singapore’s imported inflation is expected to “remain significant” for some time as prices of energy and food commodities remain high due to the ongoing supply constraints even if they’ve come off their peaks from earlier in the year.
In addition, labour markets in major advanced economies are still tight, keeping wage pressures strong, add MAS and MTI.
In Singapore, both MAS and MTI project that unit labour costs will increase further in the near term alongside robust wage growth. The cost of utilities is also likely to remain elevated.
To this end, firms are expected to continue to pass through accumulated import, labour and other business costs to consumer prices amid resilient demand.
Increases in the cost of cars and accommodation are also estimated to remain firm in the quarters ahead due to the tight Certificate of Entitlement (COE) quotas for cars and strong demand for rental housing respectively.
In 2022, MAS and MTI have projected CPI-All Items inflation to average around 6.0% and MAS Core Inflation around 4.0%. This is at the top end of their range of 5.0%-6.0% stipulated for their CPI-All Items inflation range and the range of 3.0%-4.0% for MAS Core Inflation.
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In 2023, MAS and MTI are estimating headline and core inflation to average 5.5%-6.5% and 3.5%-4.5% respectively. The figures have taken into account all factors including the impending GST increase.
“Excluding the transitory effects of the GST hike, headline and core inflation are expected to come in at 4.5–5.5% and 2.5–3.5% respectively,” reads the statement put out by MAS and MTI.
“There are upside risks to the inflation outlook, including from fresh shocks to global commodity prices and more persistent-than-expected external inflation,” it adds.
