Inflation in Singapore

In December 2018, Singapore’s overall inflation index rose to 0.5 per cent. The jump registered barely a month after the index had fallen to a six-month low of 0.3 per cent.

The rise in inflation rates occurred due to the inflation of prices for most services and retail goods. The country’s core inflation rose to 1.9 per cent in December. This was higher than the 1.7 per cent registered in November.

2018 saw a rise in the inflation index mainly because of an increase in external sources of inflation. The rise in global oil caused the average inflation to peak. In addition, several non-oil import prices reflected a higher than usual average for 2018.

A slight check in the inflation rate is expected in 2019.The domestic labour market has been reflecting a growth in 2018. An improved labour market indicates a growth in the wage rates in the coming year. This should, in turn, create an avenue for a greater domestic demand for several services and products. It is expected that the growth in demand would shift the import and labour costs on to the consumers.

However, developments in several other segments like telecommunications, electricity and retail can significantly alter the projected inflation for 2019. The cost of electricity and gas, for instance, registered a 14.6 per cent year on year rise in December 2018. This was marginally lower than the 15.4 per cent average increase calculated in November. The numbers had gone down mainly because of the phased nationwide launch of the Open Electricity Market on prices. In addition, telecommunication services fees also went down slightly at the close of the year.

On the other hand, services inflation increased to 1.5 per cent in December 2018, from 1.2 per cent in the preceding month. The rise was a result of the seasonal growth in holiday expenses and airfares. The overall cost of retail items also went up to 1.7 per cent in December as prices of clothing, footwear, and household goods rose.

According to the Ministry of Trade and Industry (MTI) and the Monetary Authority of Singapore (MAS) core inflation for 2018 had risen to 1.7 per cent from 1.5 per cent in the previous year. Based on the current market rates and the numbers of the previous years, MTI and MAS project a 1.5 percent to 2.5 range for core inflation in 2019.

It must be noted that private road transport in 2018 decreased by 3.7 per cent. Likewise accommodation costs went down by 1.9 per cent due to a gradual decrease in housing rentals.
The overall rise in consumer prices too were markedly lower than that of 2017. 2018 ended with a price rise of 0.4 percent. In comparison, 2017 had closed with a rise of 0.6 per cent.
Food inflation has remained relatively stable at 1.4 per cent since October 2018. Both non-cooked and prepared food items have had a stable and near equal rate of price increase in the last quarter of 2018.

Due to this, the projected headline inflation for Singapore in 2019 is marginally lower. The headline inflation, which considers the total inflation in the economy including those in areas like food and energy as well as accommodation and transport costs, is estimated to rise by only 1 to 2 per cent in 2019. MTI and MAS predict a continued low inflation rate in accommodation and private road transport costs in the coming year.


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