Singapore’s core inflation increases at a faster pace in May

SINGAPORE (CNA) – Singapore’s consumer prices rose in May, driven mainly by higher services inflation and a smaller decline in the cost of retail and other goods, data showed yesterday.

This is the fourth straight month that Singapore’s core inflation has remained positive.

Core inflation increased to 0.8 per cent year-on-year in May, up from the previous month’s 0.6 per cent, according to data from the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI).

The headline consumer price index (CPI), or overall inflation, rose to 2.4 per cent year-on-year in May, up from 2.1 per cent in April, on account of higher private transport and accommodation inflation, as well as the increase in core inflation.

Core inflation excludes the price of private transport and accommodation.

“The increase in core and headline year-on-year inflation was partly due to the low base in May last year when the circuit breaker measures were in place,” said the authorities.

A man cycles along the Marina Bay in Singapore. PHOTO: XINHUA

MAS and MTI said external inflation has risen amid the recovery in global oil prices and “turnaround in producer price inflation in the major economies”.

“While there are some upside risks, the upward pressure on global inflation should ease in the latter part of this year,” they said.

In Singapore, overall inflation is expected to remain elevated at around current rates in the near term and ease in the second half of the year as base effects fade, the authorities added.

Core inflation will continue to gradually increase, though the measures announced under Phase 2 (Heightened Alert) and the continued restrictions under Phase 3 (Heightened Alert) could have an “overall dampening effect on the pickup in underlying inflation”, MAS and MTI said.

Wage growth for the year as a whole is expected to be muted as slack in the labour market will take time to be fully absorbed, while commercial rents are projected to stay low, the authorities said.

Private transport and accommodation costs should remain resilient on the back of firm demand for cars and rental accommodation.

Core inflation is expected to average zero to one per cent in 2021, while the overall inflation is forecast to come between 0.5 per cent and 1.5 per cent.