Singapore's inflation edges higher in October

SINGAPORE: Singapore's inflation edged higher in October, in line with market expectation.

The consumer price index went up 2 per cent on-year in October, compared to 1.6 per cent in September, largely driven by higher private road transport costs.

And looking ahead, economists expect inflation to continue rising due to rising labour costs.

A pick up in COE premiums pushed private road transport costs higher in October.

The latest data from the Ministry of Trade and Industry and the Monetary Authority of Singapore (MAS) showed private road transport costs rising 2.7 per cent on-year, following the 2 per cent decline in COE premiums the previous month.

This has, in turn, caused overall consumer price index (CPI) for the month to end higher as well.



Francis Tan, an economist from UOB, said: "Going forward, we think that private road transport costs will likely trend higher over the next few months because of impending re-categorisation of the COE upcoming in February. So we think that private road transport costs will average between 1 and 3 per cent over the next few months."

Meanwhile, food inflation came in at 2.5 per cent last month, reflecting steeper price increases for non-cooked food and prepared meals.

And services inflation eased to 2.5 per cent from 2.7 per cent in September, led by slower increases in recreation and entertainment costs, and holiday travel.

But going forward, economists expect prices of consumer services to increase on the back of rising labour costs and a tight labour market.

Accommodation costs also moderated to 1.9 per cent due to disbursement of rebates for HDB households.

Daniel Wilson, Asia-Pacific economist for ANZ, said: "They gave three rebates this year -- April, July and October -- so we saw a month-on-month pullback. But this isn't expected to persist. And although accommodation costs are likely to be rather flat to declining, we're not expecting accommodation costs to fall rapidly over the coming year, so they won't be a big driver of inflation, but they won't be a big pullback either."

MAS Core Inflation, which excludes accommodation and private road transport costs, rose to 1.8 per cent from 1.7 per cent in September due to stronger contributions from food and oil-related items.

MAS expects inflation to come in between 2.5 per cent and 3 per cent in 2013, and 2 to 3 per cent in 2014.