Singapore inflation inches up after 4-year low in Feb

20140424-st-sg-inflation-up-after-4-yr-low-pic Singapore's inflation rate crept up last month to 1.2 per cent after sinking to a four-year low of just 0.4 per cent in February.

Cars were slightly cheaper in March compared with the same month last year, but food, education and health-care costs kept inching up.

The cost of private road transport fell by 2.8 per cent, after declining 7.1 per cent in February.

The continuing slide was mainly because certificate of entitlement (COE) premiums were elevated early last year and are now cheaper in comparison.

Accommodation costs also moderated amid a softening housing rental market, rising at a slower 1.7 per cent last month, down from 2 per cent in February.

However, these dips were offset by higher costs elsewhere.

Services inflation rose to 2.4 per cent from 2.1 per cent in February, led by higher costs of household services and holiday travel. Food prices went up 2.9 per cent in March over the same month last year, while health-care costs were 3.4 per cent higher.

Core inflation - excluding private road transport and accommodation costs - rose to 2 per cent from February's 1.6 per cent.

This measure is released by the Monetary Authority of Singapore (MAS) and is seen as a better gauge of out-of-pocket cash expenses for most households.

The MAS expects core inflation of 2 per cent to 3 per cent this year, while overall inflation is tipped for a slightly lower 1.5 per cent to 2.5 per cent.

Domestic cost pressures, particularly stemming from a tight labour market, are likely to remain the primary source of inflation, said the MAS and Ministry of Trade and Industry in a statement yesterday.

Car prices are expected to drive up overall inflation in the coming months, mainly due to a low base last year as COE premiums tumbled after the implementation of car loan curbs in February last year.

The increase in consumer prices should ease in the second half of the year, with car prices "likely to add negligibly to inflation" for the full year, the statement said.

The Land Transport Authority announced earlier this month that the COE quota for cars will be raised by 42 per cent from May to July this year.

This "should help keep a lid on premiums", said Bank of America Merrill Lynch economist Chua Hak Bin.

OCBC economist Selena Ling said inflation is expected to hit 2.5 per cent in April and stay elevated for the rest of the year, as firms continue to pass on higher labour costs to consumers.

A new round of foreign worker levy rises in July will add to labour costs, particularly for firms with a higher share of foreign workers, said UOB economist Francis Tan.

"As Singapore's economy remains resilient and rides the global economic recovery, firms will enjoy better pricing power and are more likely to pass on cost increases to their customers," he said.

Source: Straits Times, 24 Apr 2014