Monday, January 25, 2021-1:12 pm
In Singapore, core consumer prices fell further in December, despite headline indicators breaking out of deflation, according to the Consumer Price Index (CPI) figures from the Singstat on Monday.
Core inflation fell to -0.3% year-on-year, but headline inflation remained flat at 0%.
Economists expected both core and headline inflation to be stable at -0.1% from the previous month, but the difference was driven by higher driveway costs.
In December figures, both core and headline inflation for the full year were -0.2% in 2020, down from 1% and 0.6% in 2019, respectively.
The Monetary Authority of Singapore (MAS) and the Ministry of International Trade and Industry (MTI) have not changed their 2021 inflation forecasts and have only slightly revised their outlook for the upcoming quarter.
The decline in core inflation, which excludes accommodation and driveway costs, was due to a significant drop in service costs of -0.8%, deepening from -0.2% in November.
Food inflation also fell from 1.8% in November to 1.6%.
In other categories, the cost reduction was modest. Retail and other merchandise costs fell 1.2%, mitigating the 2% decline in November.
Electricity and gas costs fell 6.7%, compared to a 6.8% drop in November.
Headline inflation was boosted by private transport costs, which rose 1.2% in December against the backdrop of soaring car prices. This is a recovery from -1.3% in November. Inflation rates at accommodations were stable at 0.3%.
In a joint statement, MAS and MTI maintained their 2021 forecasts for core inflation at an average of 0-1% and headline inflation at -0.5-0.5%.
However, they now expect external inflation to recover in the coming quarters as global oil prices recover. This is in contrast to what we expected to remain low in previous releases.
Nonetheless, they added, “the degree of increase will be limited by the sustained negative output gap in Singapore’s major trading partners.” They expect domestic cost pressures to remain low as wage growth and commercial rents are likely to remain restrained.
Accommodation costs are expected to fall as rents may soften, partly due to a decline in employment of foreigners, while private transportation costs are expected to decline as the supply of vehicle purchase rights is expected to decline in 2021. It should rise slowly. “