Singapore’s core rate of inflation jumps 3.3% this October
Singapore’s readings on inflation could be at greater risk in the near future, given recent geopolitical tensions. The upcoming GST increases and other administrative prices planned for 2024 such as the 7-percent hike in public transit fares starting in December this year may also increase the likelihood of an upward revision.
Bloomberg reported that this latest reading was above the median forecast of private-sector analysts, which was 4.5 percent. MTI and MAS attributed a higher headline to private transport and a rising core inflation.
Core inflation, excluding private transport and accommodation, rose to 3,3%. This was a little higher than the 3 percent recorded in previous months, and above the median economist estimate of 3.1%.
MTI & MAS attributed increased core prices to higher retail and service inflation, as well a rising cost for electricity and natural gas.
On a monthly basis, the headline rate of inflation was up by 0.2 percent in October. Core inflation, however, increased by 0.4 percent. In October, the inflation rate was higher for many categories.
Private transport inflation jumped to 11.7 percent from 8.5 percentage points the previous month, thanks to a faster rate of rise in car prices.
The inflation rate for services was 3.4%, up from the previous month’s figure of 3.14%, due mainly to higher holiday expenses.
Retail and Other Goods Inflation grew to 1.6 % from 0.9 % previously. This was due to the higher prices of personal-care products and medical items.
Singapore’s headline price inflation is likely to continue to fluctuate in the coming month due to fluctuations in Certificate of Entitlement(COE) prices.
The private sector economists believe that both the headline and core inflation rates increased in October.
On Thursday, November 23, data from Singapore’s Monetary Authority (MAS) and Ministry of Trade and Industry revealed that headline inflation was up to 4.7 %, compared to the 4.1 % recorded in the previous month.
Rent increases slowed the pace of inflation in accommodation, which was 4.3 per cent last September.
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In December, core prices are expected to decline to between 2.5% to 3% on an annual basis. By early 2024 however, it is anticipated that core inflation will be impacted by the GST rate hike, as well seasonal effects.
As import costs continue to decline, and as tightness on domestic labour markets continues to ease, core inflation is expected resume a generally moderating pattern over the next few years.
Due to the higher gas and electricity rates, inflation in October was up by 1.8% after falling by just 1.4% in September.
The food inflation fell to 4,1%, down from the previous 4.3%, as the price of non-cooked and ready meals increased at a slower pace.
While inflation has slowed over the course of the year 2023, the price hikes in October were higher than pre-pandemic levels.
Some economists from the private sector have raised their inflation estimates for 2023 as a result of the unexpectedly high inflation rates in October.
Economists continue to expect MAS maintain monetary policies settings at the next scheduled meeting in January. But they are split over whether the central banks will ease policy settings later in 2024.
Economists predict a reversal to tightening monetary policy in 2024. They expect this to happen in April or July, depending on the timing of wage increases.
In their announcement, MAS and MTI reaffirmed their inflation outlook. Core inflation was still projected at around 4% for 2023. Headline inflation would average around 5%.
In 2024 headline and Core inflation will average between 3 and 40%, and 2.5 to 3.5% respectively. If we exclude the temporary effects of the GST (goods and services tax) increase from 9% to 9.5 per cent that will take place in January, core and headline inflation are expected to range between 1.5 per cent to 2.5 percent, respectively.