Singapore's inflation rate eases to 4.0% in Oct

Singapore's inflation rate eases to 4.0% in Oct
By Kristie Neo | Posted: 23 November 2012 1428 hrs
     
SINGAPORE: Singapore's inflation rate eased to 4.0 per cent in October from 4.7 per cent the previous month.

This slower-than-expected increase in the consumer price index was mainly due to smaller gains in transportation and housing costs.

Meanwhile, the core inflation rate, which excludes transport and accommodation costs, fell to 2.2 per cent in October from 2.4 per cent in September.

The Monetary Authority of Singapore (MAS) said this was due to lower contributions from food and oil-related items.

In October, transport cost increases moderated to 8.3 per cent from 10.8 per cent the previous month, reflecting the correction in Certificate of Entitlement (COE) premiums in September.

However, the relief for consumers may be short-lived, with plenty of upside pressure expected into 2013.

Alvin Liew, senior economist at UOB, said: "Judging from the latest COE auctions, some of the categories went back to fairly high levels and two categories went up to record high levels. And that would mean there would be small upside pressure coming in from the transport, private road transport component."

Meanwhile, accommodation-related cost increases also slowed to 6.8 per cent in October from 7.7 per cent the previous month.

The MAS said the moderation was largely due to the lower base effect in September 2011, where HDB rental and service and conservancy charges (S&CC) rebates were given out.

Together, accommodation and transportation costs account for close to two-thirds of October's inflation figures.

Food and oil-related inflation rates also saw declines.

Food inflation slowed to 1.7 per cent in October compared to 2.1 per cent the preceding month, following smaller price increases in non-cooked food and prepared meals.

Prices of oil-related items also rose at a slower pace in tandem with the moderation in global crude oil prices.

Meanwhile, services inflation rose to 3.1 per cent in October from 3.0 per cent in September, due to a stronger pickup in the costs of holiday travel and household services.

Healthcare costs peaked at 5.2 per cent in October, the highest since mid-2008. This is compared to just 1.8 per cent a year ago.

Tim Condon, managing director and head of research (Asia) at ING Bank NV, said: "These are things that are not susceptible to supply shocks. They are really driven by demand, so they are up this year compared to a year ago.

"That suggests that inflation expectations actually are elevated in Singapore, so that actually puts a dampener on how quickly we will see inflation coming off here."

Looking forward, the MAS said that imported inflation will be generally benign, given the continued weakness in the global economy.

Still, the authority expects global food prices to potentially face upward pressures in the next few months and into the early part of 2013, due to weather-related supply disruptions.

MAS added: "Meanwhile the persistent tightness in the labour market will support slightly stronger wage increases in 2013, which will continue to be passed through to consumer prices."

On the whole, MAS anticipates core inflation to be "broadly stable" and averaging around 2.5 per cent this year, and 2 to 3 per cent in 2013.

For the full year, CPI-All items inflation will remain "elevated" in the fourth quarter of 2012 and the first quarter of 2013, reflecting significant contributions from housing and accommodation costs.

CPI-All items inflation is likely to come in slightly above 4.5 per cent in 2012 and ease to 3.5 to 4.5 per cent in 2013.

- CNA/xq/ms

- wong chee tat :)