CPI falls for 11th month, but rate of decline slows
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SINGAPORE — Consumer prices fell for the 11th consecutive month in September, as lower Certificate of Entitlement (COE) premiums for cars and a persistently soft housing rental market extended the deflationary trend.
The All-Items Consumer Price Index (CPI) fell 0.6 per cent last month from September a year ago, moderating from the 0.8 per cent decline in the previous month, the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry said today (Oct 23). The moderation was due to a stronger pick-up in the prices of consumer services and retail items, they said. Economists in a Reuters poll had expected a 0.7 per cent decline.
Prices are not expected to pick up until the middle of next year, said HSBC economist Joseph Incalcaterra.
“The headline measure continues to be dragged down by deflating property prices and lower COE premiums for vehicles. These two factors may keep the headline CPI reading negative through the first half of next year, after which the gauge may turn positive on a more sustained basis,” he said. Private road transport costs fell by 3.2 per cent last month, accelerating from the 2.9 per cent decline in August, with lower petrol pump prices contributing to the drop. Meanwhile, accommodation costs contracted for the 14th consecutive month, declining by 2.9 per cent, the same pace as in the previous month as the housing rental market continued to soften.
Services inflation rose to 0.8 per cent from 0.5 per cent in August, mainly as a result of the rise in healthcare fees and public road transport costs, as the dampening effects of enhanced medical subsidies and SG50-related price promotions dissipated.
However, MAS core inflation, which excludes the costs of accommodation and private road transport, was at its highest since March. The measure increased 0.6 per cent last month, accelerating from the 0.2 per cent rise in August, as prices of consumer services and retail items rose, but economists said the pick-up will not last. “This six-month high in core CPI will likely prove ephemeral. Singapore’s electricity tariffs were reduced an average of 9.3 per cent on Oct 1 (Singapore’s electricity tariffs are recalibrated on a three-month basis and are derived from natural gas prices in the previous quarter), which should bring the core CPI back to the range of 0.2 to 0.3 per cent year-on-year,” said Mr Incalcaterra.
ANZ economist Ng Weiwen said that if global growth trails expectations for next year and undershoots core inflation — with China seeing a sharper-than-expected moderation and the expansion in the United States not picking up — the MAS could ease again.
Earlier this month, at its semi-annual policy meeting, the MAS had eased its monetary policy for the second time this year by reducing the slope of the Singapore dollar band, allowing the local currency dollar to appreciate at a slightly slower pace against those of its trading partners.
The central bank also narrowed its All-Items and core CPI forecast for this year to minus 0.5 per cent and 0.5 per cent, respectively. These are the lower ends of its earlier projections of between minus 0.5 per cent and 0.5 per cent for All-Items CPI and between 0.5 and 1.5 per cent for core inflation. For next year, MAS said All-Items CPI is forecast at between minus 0.5 per cent and 0.5 per cent, while core CPI is projected at between 0.5 and 1.5 per cent.
