Singapore's inflation up slightly in May

SINGAPORE: Singapore's headline inflation inched up slightly to 1.6 per cent on-year in May from 1.5 per cent in April.

While car prices declined, it was more than offset by higher contributions from all other major categories.

According to the Monetary Authority of Singapore (MAS), accommodation costs increased 5.1 per cent in May, up from 2.4 per cent in April as the one-off rebates for Housing & Development Board service and conservancy charges was available in April only.

Meanwhile, imputed rentals on owner-occupied accommodation continued to increase, contributing 0.9 percentage point to overall inflation in May.

On the other hand, the cost of private road transport fell for the first time since 2009, declining by 3.7 per cent in May, compared to the 0.5 per cent rise in April.

MAS said this was due to lower Certificate of Entitlement (COE) premiums in April and price adjustments by car dealers following the implementation of motor vehicle related policy measures.


Meanwhile, services inflation rose 2.5 per cent in May from 2.2 per cent in April. This was due mainly to costlier medical treatment and medical insurance as well as a smaller fall in holiday travel cost. 

Food prices were up 2.0 per cent in May, slightly stronger than the 1.8 per cent in the preceding month.

MAS said this reflects steeper price increases for both non-cooked food and prepared meals.

In addition, MAS said core inflation, which excludes the costs of accommodation and private road transport, rose to 1.7 per cent in May from 1.4 per cent in April, largely due to steeper increases in services fees and food prices.

Looking ahead, MAS said imported inflation will likely remain subdued this year, given ample supply buffers in the commodity markets.

However, MAS warned that domestic cost pressures are expected to persist amid a tight labour market and cost pass-through to prices of consumer services could also pick up slightly.

As such, MAS said core inflation is expected to rise moderately in the second half of the year and average 1.5 per cent to 2.5 per cent in 2013.

Imputed rentals on owner occupied accommodation will continue to add significantly to CPI-All Items inflation although MAS believes the pace of increase will be slower in the second half of this year, with more private housing units coming on stream.

While COE premiums are expected to fluctuate, its contribution to CPI-All Items inflation is likely to be lower compared to last year.

Leif Eskesen, HSBC's chief economist for India and ASEAN, said: "As we begin to see global growth gain more traction, I think at the end of the year for that matter, global commodity prices are not going to be as soft as they currently are.

"That will also add to cost pressures in the economy.  I think as we move to the latter part of 2013,  overall inflation pressures will begin to pick up again." 

For 2013, MAS expects CPI-All Items inflation to come in at three per cent to four per cent.