Singapore’s core inflation eases to 3.2% in November

Overall inflation fell to 3.6 per cent year-on-year in November, a drop from 4.7 per cent the previous month.

SINGAPORE: Singapore’s core inflation dipped to 3.2 per cent year-on-year in November, official data showed on Tuesday (Dec 26).

It edged down from 3.3 per cent year-on-year in October due to lower inflation for retail and other goods, food, as well as electricity and gas costs, the Ministry of Trade and Industry (MTI) and the Monetary Authority of Singapore (MAS) said.

Core inflation had risen to 5.5 per cent in January and February this year, a 14-year high, before trending downwards. Singapore's core inflation fell to 3 per cent in September, the lowest since March 2022.

Core inflation excludes accommodation and private transport costs.

Overall inflation fell to 3.6 per cent year-on-year in November, a drop from 4.7 per cent the previous month. This was also lower than a forecast of 3.8 per cent by economists, Reuters reported.

The decrease reflected lower private transport inflation, said MTI and MAS.

SECTORS

Services inflation rose to 3.5 per cent in November, up from 3.4 per cent in October, due to the costs of outpatient services, recreational and cultural services, and telecommunication services rising at a faster pace. Airfares, however, posted a smaller decline.

Retail and other goods inflation fell to 1 per cent in November, as the prices of medical goods and household durables largely declined. The prices of personal care products also rose more slowly.

Electricity and gas costs edged down to 1.5 per cent in November due to a smaller increase in electricity costs.

Food inflation eased to 4.0 per cent in November as the prices of prepared meals saw smaller increases.

Private transport inflation fell to 4.2 per cent in November from 11.7 per cent in October, driven by a slower pace of increase in car prices.

Accommodation inflation in November dipped to 4.1 per cent in November as the pace of increase in housing rents moderated.

OUTLOOK

Global crude oil prices have been volatile in recent months, falling in November after having risen earlier, said MAS and MTI.

Global prices for most food commodities, as well as intermediate and final manufactured goods, have also continued to fall.

“These factors, alongside the stronger Singapore dollar trade-weighted exchange rate, should continue to temper Singapore’s import cost pressures in the quarters ahead.”

Locally, unit labour costs are expected to rise at a slower pace, in tandem with the gradually cooling labour market. 

“Businesses are likely to continue passing through higher labour costs to consumer prices, albeit at a more gradual pace,” said MAS and MTI.

Core inflation is projected to remain around current levels and come in at the upper end of the 2.5 per cent to 3 per cent range at year-end.

In early 2024, core inflation is expected to be impacted by the increase in the Goods and Services Tax (GST) rate as well as seasonal effects.

“However, core inflation should resume a broadly moderating trend over the course of 2024, as import cost pressures decline and tightness in the domestic labour market continues to ease,” said MTI and MAS.

Overall inflation could remain volatile in the near term amid recent swings in Certificate of Entitlement (COE) premiums.

Over the course of next year, overall inflation is expected to decline as private transport inflation slows in tandem with an expected increase in COE quotas. Accommodation inflation is also projected to ease as the supply of completed housing units increases, said MTI and MAS.

For 2023 as a whole, overall inflation is expected to average around 5 per cent, while core inflation is expected to average around 4 per cent.

In 2024, overall inflation is projected to average 3 to 4 per cent, while core inflation is expected to average 2.5 to 3.5 per cent.

Excluding the transitory effects of the 1 percentage point increase in the GST rate to 9 per cent, overall inflation is expected to come in at 2.5 to 3.5 per cent, while core inflation is forecast to be between 1.5 and 2.5 per cent.

“Upside risks remain, including from fresh shocks to global energy and food commodity prices due to geopolitical conflicts and adverse weather events, and more persistent-than-expected tightness in the domestic labour market,” said MTI and MAS.

“At the same time, there are also downside risks such as a sharper-than-projected slowdown in the global economy, which could induce a greater easing of cost and price pressures.”