Singapore’s CPI-All Items inflation (or headline inflation) increased by 6.6% on a y-o-y basis in January, up from the 6.5% print in December 2022.
The higher inflation was due to the higher core inflation as well as the rise in accommodation inflation.
In January, the Monetary Authority of Singapore (MAS) Core Inflation also increased by 5.5% y-o-y, up from December’s print of 5.1%. This was driven by the higher inflation for services, food and retail & other goods, along with the increase in the GST rate.
The higher core inflation was expected by MAS and the Ministry of Trade and Industry (MTI) following the GST hike in January.
The higher print also came in line with analysts’ expectations where headline and core inflation were expected to reaccelerate in the 1Q2023 and 1H2023, according to OCBC Bank’s chief economist & head of treasury research & strategy Selena Ling and RHB Group Research’s senior economist Barnabas Gan in their previous note.
During the month of January, services inflation rose due to stronger price increases for outpatient services and tuition & other fees. The rise in the cost of telecommunication services and airfares also contributed to the higher services inflation.
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Food inflation also increased due to a steeper increase in the price of prepared meals.
Accommodation inflation rose due to higher housing rents.
Retail and other goods inflation grew due to a faster pace of increase in the prices of clothing & footwear, household durables and alcoholic drinks & tobacco.
Meanwhile, electricity and gas inflation fell due to smaller increases in electricity and gas tariffs.
Private transport inflation also eased as car and petrol prices rose at a slower pace.
In its outlook statement, MAS and MTI say Singapore’s imported inflation is expected to remain “firm” for some time. This is due to the accumulated costs that pass through the global value chain even though demand conditions in major economies have softened and supply chain frictions continue to ease. Prices of energy and food commodities have come off the peaks in 2022 but remain elevated. Meanwhile, labour markets in major advanced economies are still tight, keeping wage pressures strong, say MAS and MTI.
In Singapore, unit labour costs are expected to increase further in the near term alongside growth in wages. The cost of utilities is also likely to remain elevated even though electricity tariffs have come down from their peak in the 3Q2022.
“As such, businesses are expected to continue to pass through accumulated import, labour and other costs to consumer prices amid resilient demand,” say MAS and MTI.
“Meanwhile, car and accommodation cost increases are likely to stay firm in the quarters ahead on the back of tight certificate of entitlement (COE_ quotas for cars and strong demand for rental housing, respectively,” they add.
In the 1Q2023, MAS Core Inflation is expected to remain above 5% y-o-y as previously projected in MAS’s October 2022 macroeconomic review. Core inflation is also expected to remain elevated in the 1H2023 below slowing “more discernibly” in the 2H2023.
For 2023, MAS and MTI have projected Singapore’s headline and core inflation to average 5.5%–6.5% and 3.5%–4.5% respectively. Excluding the transitory effects of the one percentage point increase in the GST to 8%, headline and core inflation are expected to come in at 4.5%–5.5% and 2.5%–3.5% respectively.
“There are upside risks to the inflation outlook, including from fresh shocks to global commodity prices and more persistent-than-expected external and domestic sources of inflation,” say MAS and MTI.
