SINGAPORE: Singapore’s core inflation in January rose to 2.4 per cent on a year-on-year basis, the highest level in more than nine years, official data released on Wednesday (Feb 23) showed.
This was driven by higher inflation for food and electricity and gas, as well as a slower pace of decline in the cost of retail and other goods, said the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) in a joint media release.
The increase in January was the biggest year-on-year growth since September 2012, when core inflation also rose to 2.4 per cent.
January’s headline consumer price index, or overall inflation, came in at 4 per cent year-on-year, unchanged from the preceding month.
Core inflation excludes accommodation and private transport costs. These items are excluded as they tend to be significantly influenced by supply-side administrative policies and are volatile.
“Global inflation has risen further recently and could stay high for some time before easing in the latter half of the year,” said MAS and MTI.
“In the near term, heightened geopolitical risks and tight supply conditions will keep crude oil prices elevated.
“Bottlenecks in global transportation and labour shortages in a number of Singapore’s major trading partners are also likely to persist.”
STEEPER INCREASE IN ELECTRICITY AND GAS TARIFFS
On a year-on-year basis, food inflation in January picked up, rising to 2.6 per cent from 2.1 per cent the month before.
Electricity and gas inflation in January rose to 17.2 per cent in January from 10.7 per cent the month before, due to a steeper increase in electricity and gas tariffs, said MTI and MAS.
Due to higher fuel costs, the electricity tariff for households was raised to 27.22 cents per kilowatt-hour (kWh) for the first quarter of 2022, inclusive of GST, from 25.80 cents per kWh in the preceding quarter.
The gas tariff for households was revised upwards to 21.62 cents per kWh, including GST, from 20.37 cents per kWh over the same period. On a year-on-year basis, the electricity tariff rose by 22.6 per cent in January, while the gas tariff increased by 17.3 per cent.
The cost of retail and other goods fell at a slower pace, to -0.3 per cent in January from -0.7 per cent in December last year.
This was mainly because prices of clothing and footwear, as well as personal care products registered smaller declines. Prices of medical products and household durables picked up more strongly.
January’s services inflation dipped as inflation for holiday expenses and airfares fell. Telecommunication services fees declined more sharply, while the pace of increase in domestic and household services costs also eased.
With the introduction of vaccinated travel lane flights, the actual airfares for such flights are being progressively incorporated into the CPI, compared to the previous approach of imputing them using the overall change in CPI-All Items when there were no flights due to COVID-19, said MTI and MAS.
Accommodation inflation edged up due to a larger increase in housing rents, while private transport inflation fell to 14 per cent on account of a smaller increase in car prices.
Ongoing external supply constraints should ease in the second half of this year, said MTI and MAS, leading to “some moderation” in imported inflation.
But there remain upside risks to inflation from pandemic-related and “geopolitical shocks” that could further disrupt global supply chains.
The authorities said the domestic labour market should continue to tighten and lead to strengthened wage pressures over the course of the year.
Cost increases are also likely to filter through to higher services prices as private consumption pics up.
Car and accommodation cost increases are “likely to remain robust in the near term”, said MAS and MTI.
“All in, MAS core inflation is forecast to pick up further in the near term, and could reach 3 per cent by the middle of the year before easing in the second half of 2022 as external inflation recedes,” they said.
“Rising cost of air travel is expected to account for a significant part of the increase in core inflation in the near term.”
For 2022, core inflation is projected to average 2 per cent to 3 per cent, while overall inflation is forecast to come in within 2.5 per cent to 3.5 per cent.
Last month, MAS said it was tightening its monetary policy settings amid an upward shift in Singapore’s inflation outlook.
The adjustment falls outside of MAS’ normal cycle of twice-yearly monetary policy reviews, typically in April and October.
MAS will “slightly” raise the rate of appreciation of its monetary policy band given the risks of higher core inflation in the near term, it said last month.
There will be no change to the width and the level at which the Singapore dollar’s nominal effective exchange rate (S$NEER) policy band is centred.
“This move builds on the pre-emptive shift to an appreciating stance in October 2021 and is appropriate for ensuring medium-term price stability,” said MAS in January.