Singapore’s core rate of inflation surges to 3.3% in October

In 2024 we expect headline and core prices to average 3-4 percent and 2.5-3.5%, respectively. In 2024, headline and base inflation will be projected at 2.5 to 3.5 percent, with 1.5 to 2.5 percent respectively.

The unexpected rise in inflation in October has prompted some economists working in the private sectors to increase their forecasts of inflation for 2023.

Economists believe that MAS will continue its current monetary policy setting at the January meeting. They are split about whether the central Bank will reduce policy settings by the end of 2024.

Economists anticipate a reversal on monetary tightening as early in April as 2024. However, the meeting in July or in October could see this happen, due to “the possible lagged transmittal of earlier wage rises and elevated business cost into services inflation”.

MAS and MTI stayed true to their earlier inflation projections, with core inflation projected to remain at 4 percent in 2023. And headline inflation expected to average 5 percent.

In December, core-inflation is expected to be between 2.5% and 3.0% year-onyear. The increase in GST rates, along with seasonal effects, are expected to affect core inflation by early 2024.

In 2024, however, core prices should continue to fall as import costs decrease and the tightness in the labor market continues.

Singapore’s Inflation Readings may have more immediate upside risks in the coming months. This is due to recent geopolitical conflicts, the upcoming GST hike, other administrative price hikes planned for 2020, like the 7 percent increase in public transportation prices starting December this calendar year.

MTI and MAS attributed a rise in core prices due to a higher inflation rate, both for services and goods sold at retail as well. They also cited an increase in the cost of gas and electricity.

While inflation has moderated throughout 2023 the increase in October kept price increases higher than average.

Comparatively, food inflation eased, dropping to 4.1 % from 4.3 % the month before, and prices of prepared food and non-cooked meals rose less.

Housing rents have also decreased, and the inflation rate for accommodation has also been reduced to 4.2%, down from 4.3 % in September.

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The headline inflation was 0.2 percent higher in October compared to the previous month, whereas core inflation increased 0.4 percent. In October, most categories saw higher inflation.

Private transport inflation has risen to 11.7 percent, up from 8.5 percent in the previous months, as a result of a more rapid increase in automobile prices.

Services inflation increased by 3.4 percent, from 3.1 percent in September. This was due to the higher increase in holiday expenditures.

Retail and other good inflation jumped to 1.6%, up from 0.9 percent previously, due to higher prices for personal care products, medical supplies, and pharmaceuticals.

After falling 1.4 percentage points the previous months, electricity and gas inflation increased by 1.8 percentage points in October.

Singapore’s headline inflation is likely be volatile in the months to come due to fluctuations of Certificate of Entitlement (COE prices).

Private sector economists claim that inflation, both in terms of the headline rate and the core rate, has risen since October.

Data released by the Monetary Authority of Singapore and the Ministry of Trade and Industry on Thursday (Nov.23) revealed that the headline inflation rate for November rose from 4.1 to 4.7, a slight increase over the 4.1 recorded in Sept.

Bloomberg polled economists from the private sector and found that their median prediction was 4.5%. MTI attributed MTI’s and MAS’s higher headline inflation rate to increased prices for private transportation and a spike in core inflation.

Core inflation, which excludes accommodations and private transportation, increased to 3.3 percent. This was higher than last month’s 3 percent and the median estimate by economists of 3.1 percent.

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