Deflation woes persist as consumer prices fall for 12th straight month
TODAY file photo
SINGAPORE — Consumer prices fell for the 12th consecutive month in October, due mainly to lower costs of oil-related and retail items, the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said today (Nov 23).
The All-Items Consumer Price Index (CPI) fell 0.8 per cent last month compared with October a year ago, accelerating from the 0.6 per cent decline the preceding month. Economists in a Reuters poll had expected a 0.5 per cent decline.
The weak price data comes two days ahead of final third-quarter gross domestic product (GDP) performance due out tomorrow. Some economists expect Singapore to revisit a technical recession — two consecutive quarter-on-quarter contractions in GDP — after advance estimates last month showed the economy grew a marginal 0.1 per cent from the previous quarter.
Last month, the cost of oil-related items fell 10.1 per cent, extending the 8.4 per cent decline in September, as electricity tariffs were reduced further on the back of softer global oil prices, said the MAS and MTI. Prices for retail items were 0.1 per cent lower, reversing from the 0.6 per cent rise a month earlier, as a result of cheaper personal care products and a smaller increase in the price of clothing and footwear.
The housing rental market softened for the 15th consecutive month, with prices declining by 3 per cent to extend the 2.9 per cent drop in the preceding month. Private road transport fell by a more moderate 2.3 per cent, compared with the 3.2 per cent drop in September, due to a smaller decline in petrol pump prices and higher electronic road pricing (ERP) charges.
“Despite the lower costs of oil-related items wearing on to last month’s headline inflation, the key factors are still the big chunks — car prices and housing rentals. The downward pressures on inflation will still continue as long as the government measures are still in place,” said UOB economist Francis Tan.
MAS core inflation, which excludes the cost of accommodation and private road transport, eased to 0.3 per cent last month from 0.6 per cent in September, mainly reflecting the impact of lower electricity tariffs and prices of retail items, said the MAS and MTI.
The All-Items CPI is projected at about minus 0.5 per cent for this year, while core inflation is estimated at 0.5 per cent, said the MAS and MTI. For next year, headline inflation is projected at between minus 0.5 per cent and 0.5 per cent, while core CPI is forecast at between 0.5 per cent and 1.5 per cent.
Some of the deflationary pressures may wane next year due to a mix of factors, said economists.
“The ongoing El Nino weather phenomenon could pose risks of higher food prices due to disruption in food supplies. We also anticipate the disinflationary effects of the Government’s budgetary measures (medical subsidies from the Pioneer Generation packages launched since September 2014) to come to an end over the next couple of months. Lastly, barring any further decline in global oil and commodity prices, the low prices this year will likely witness the dissipation of base effects and provide a support for next year,” said Mr Tan.
