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Consumer prices fall for 18th month, core inflation rises to 0.8%

SINGAPORE — Consumer prices fell for the 18th consecutive month in April, the longest stretch of decline since Singapore’s independence in 1965, with the central bank projecting headline inflation to remain negative throughout this year while core inflation would be at the lower range of its forecast due to weak global demand conditions and a less tight domestic labour market.

The ongoing decline in consumer prices is the longest since Singapore’s independence in 1965. TODAY file photo

The ongoing decline in consumer prices is the longest since Singapore’s independence in 1965. TODAY file photo

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SINGAPORE — Consumer prices fell for the 18th consecutive month in April, the longest stretch of decline since Singapore’s independence in 1965, with the central bank projecting headline inflation to remain negative throughout this year while core inflation would be at the lower range of its forecast due to weak global demand conditions and a less tight domestic labour market.

Weighed down by private road transport and accommodation costs, the All-Items Consumer Price Index (CPI) fell 0.5 per cent year-on-year last month, but moderated from the 1 per cent decline in March, showed data from the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) yesterday. Analysts in a Reuters poll had expected a 0.7 per cent decline.

All-items CPI is expected to average at minus 1 to zero per cent for the whole year, said the MAS. Meanwhile, MAS Core Inflation — which excludes the cost of accommodation and private road transport — is likely to be in the lower half of the 0.5-1.5 per cent forecast range, barring a sharp rise in global oil prices, it added.

Last month, private road transport costs fell 7.1 per cent, faster than the 5.9 per cent decline in March, mainly due to a larger decline in car prices as a result of lower Certificate of Entitlement (COE) premiums, as well as a bigger drop in petrol pump prices.

Meanwhile, accommodation costs fell by 0.9 per cent, compared to the 3.2 per cent drop in the previous month, reflecting the persistently soft housing rental market but moderated by the low base associated with the disbursement of service and conservancy charge (S&CC) rebates to households in April last year.

“The slump in oil prices is certainly one of the key factors for the negative inflation … But, more crucially, the slowdown in growth momentum and the impact of earlier macro-prudential measures on housing and car purchases have definitely had a significant impact on the headline number,” said DBS senior economist Irvin Seah.

“This negative inflation may persist in the coming few months. The excess supply in housing stock and the associated downward pressure on rentals imply that the housing CPI index may continue to fall. In addition, the Land Transport Authority has announced increases in the supply of COE quotas, which would mean possible weakness in the private transport cost index,” he added.

Ms Selena Ling, head of treasury research & strategy at OCBC Bank, said: “Our view is that headline inflation may attempt to bottom out in the second quarter of this year, but stay subdued for the rest of the year due to the continuing drag from disinflationary asset prices and notwithstanding the slight uptick in global crude oil prices.”

MAS Core Inflation edged up to 0.8 per cent in April from 0.6 per cent in the previous month, mainly due to higher services inflation as well as a smaller decline in electricity tariffs.

UOB economist Francis Tan said: “Global consumer price actions will continue to remain subdued due to the downward pressures on the prices of major commodities as well as manufactured products. Singapore is a price taker on this front and will continue to see weak inflationary trends in the months ahead. The MAS had also earlier projected lower trends in both the headline and core inflation for 2016.”

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