Skip to main content

Advertisement

Advertisement

Consumer prices fall for 23rd straight month

SINGAPORE — Consumer prices fell for the 23rd consecutive month in September, although the rate of decline was the slowest since December 2014, leading some analysts to suggest that disinflationary pressures could finally be lifting, while others maintain that Singapore’s longest spell of negative inflation is still headed for a two-year record.

SINGAPORE — Consumer prices fell for the 23rd consecutive month in September, although the rate of decline was the slowest since December 2014, leading some analysts to suggest that disinflationary pressures could finally be lifting, while others maintain that Singapore’s longest spell of negative inflation is still headed for a two-year record.

The All-Items Consumer Price Index (CPI) fell 0.2 per cent year-on-year last month, compared with the 0.3 per cent decline in August, said the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) in a joint statement on Monday (Oct 24). The decline —  the smallest annual drop for the index since December 2014, when CPI fell 0.1 per cent — was in line with expectations from economists in a Reuters poll. 

Last month, private road transport costs fell 0.4 per cent, moderating from the 1 per cent decline in August, largely on account of a smaller drop in petrol prices. Accommodation costs declined 3.7 per cent, extending the 3.6 per cent fall in the previous month, amid continued softness in the housing rental market.

“(The) impact of low energy prices dissipated as oil prices recovered. Easing in car loan financing regulations by the MAS and the reduction in the COE quota by the Land Transport Authority have both contributed to the gradual uptrend in the transport CPI. In our opinion, the transport CPI inflation will turn positive over the next two to three months. And that should bring overall CPI inflation into the positive territory as well,” DBS senior economist Irvin Seah said.

However, UOB senior economist Alvin Liew said: “This was the 23rd consecutive month of price declines and we look on track to achieve the two-year milestone of headline CPI deflation in October.”

JP Morgan economist Benjamin Shatil said there was little in the September CPI report to suggest any change in the “benign inflation outlook” and that the bank continues to look for only a modest rise in core inflation into next year. “Technical factors — a rise in private transport costs in particular — will bias up headline inflation next year but should be less impactful for core,” Mr Shatil said.

Last month, MAS Core Inflation — which excludes the costs of accommodation and private road transport — moderated to 0.9 per cent in September from 1 per cent in August, as lower services inflation offset a stronger pick-up in food prices. This is the smallest rise since the 0.8 per cent increase reported in April.

In its joint statement, the MAS and MTI noted that headline “inflation has troughed and is projected to pick up to 0.5–1.5 per cent next year, from around minus 0.5 per cent in 2016, largely reflecting the rise in private road transport cost.” MAS core inflation, was maintained at 1 per cent for this year, and expected to rise to between 1 and 2 per cent next year.

After easing policy three times in two years, the MAS refrained from easing in its biannual meeting earlier this month. In its policy statement, the MAS highlighted the weaker economic growth in Singapore, cautioning that things would not pick up significantly next year. It projected that core inflation will rise only gradually next year and average slightly below 2 per cent over the medium term. Core inflation is the central bank’s preferred gauge for monetary policy decisions. 

UOB’s Mr Liew noted that the MAS neutral monetary stance is likely to remain for a while longer. 

“The MAS already prepared the stage for the longevity of the current neutral appreciation with the inclusion of the statement ‘a neutral policy stance will be needed for an extended period to ensure medium-term price stability’. This will probably mean another status quo in the April 2017 MAS policy meeting, unless there is an unexpected core inflation spike ahead of the April decision,” he said.

Read more of the latest in

Advertisement

Advertisement

Stay in the know. Anytime. Anywhere.

Subscribe to get daily news updates, insights and must reads delivered straight to your inbox.

By clicking subscribe, I agree for my personal data to be used to send me TODAY newsletters, promotional offers and for research and analysis.