SINGAPORE: Singapore’s inflation rate eased in September after four consecutive months of gains, largely due to a decline in private road transport cost.
The Department of Statistics said the Consumer Price Index (CPI) rose 1.6 per cent year-on-year in September, compared to 2.0 per cent in August.
The headline CPI rate is below economists’ forecasts of about 2.0 per cent for September.
Lower Certificate of Entitlement (COE) premiums brought down private road transport cost, which fell by 2.0 per cent after rising marginally in August.
Vishnu Varathan, a senior economist at Mizuho Bank, said: “Any reprieve you get from the COE price is going to be temporary. We will continue to see headline inflation being supported – albeit lower than last year – on COE prices feeding through.
“If we were to assume that COE prices stabilise at about S$90,000 to S$100,000, it will lead to COE inflation once again.”
In a statement, the Monetary Authority of Singapore (MAS) said the correction in car prices was due to the high base a year ago, and it more than offset the increase in petrol pump prices in September.
Accommodation cost eased to 3.9 per cent, which is due to a smaller increase in market rentals for both private and HDB properties.
Services inflation was stable at 2.7 per cent, as the higher recreation and entertainment cost was offset by lower contributions from education and household services fees.
Food inflation was 2.4 per cent in September, similar to a month ago.
MAS core inflation, which excludes the costs of accommodation and private road transport, was slightly lower at 1.7 per cent in September, compared to 1.8 per cent in August.
Economists said core inflation is a better indicator of underlying cost pressures that are passed on to consumers. These include business rentals, COE premiums for commercial vehicles and labour costs.
Cost pressures are most keenly felt in the retail and food and beverage sectors, where labour shortages are most severe. This means that one’s daily dose of coffee, for example, could become more expensive in the coming years.
Michael Wan, an analyst for Asia Ex-Japan Economics at Credit Suisse, said: “Structurally, the economy is still trying to move away from its dependence on labour force growth, so over the next few years, the story will still be one where inflation will rise, and there will still be labour shortages in many sectors in the economy. So I do expect core inflation to remain structurally high over the next few years.”
MAS expects core inflation to rise over the next few quarters, and average 1.5 to 2 per cent in 2013 and 2 to 3 per cent in 2014.
CPI-All Items inflation is projected to come in at 2.5 to 3 per cent in 2013 and 2 to 3 per cent in 2014.
Singapore is into the fourth year of its restructuring effort.
The government wants to reduce reliance on cheap foreign labour and increase labour productivity, so as to lift wages for lower-income Singaporeans.
Singapore"s inflation eases to 1.6% in September
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