Despite deepening concerns over growth, Singapore's inflation remains stubbornly high and may creep above the government's fullyear forecast of 5 per cent.
Consumer prices rose 5.4 per cent in October from a year ago, on the back of higher rentals and transport and food costs.
This was a slight moderation from September's inflation rate of 5.5 per cent, but higher than the 5.2 per cent consensus forecast. After adjusting for seasonal factors, the consumer price index (CPI) rose 0.2 per cent month-on-month, the Department of Statistics said yesterday.
Housing prices rose 9.9 per cent from a year ago in October due to both electricity tariffs and accommodation costs, which rose in line with higher imputed rentals of owner-occupied accommodation. But excluding accommodation, the CPI still rose 4.1 per cent year-onyear in October.
Transport costs rose 10.5 per cent from last October, due once again to the spike in car certificate of entitlement premiums and higher petrol prices.
The Monetary Authority of Singapore's core inflation measure, which strips out both accommodation and private road transport costs, also rose slightly to 2.3 per cent last month, following September's 2.1 per cent.
Food costs rose 3.5 per cent across a whole range of foods - prepared meals, fresh fish, dairy products and eggs, meat and poultry as well as vegetables were all pricier than they were a year ago.
Scoop of the Day:
Headline and core inflation elevated in Oct. There was no respite from housing or transport costs in Oct with both remaining elevated, which helped to keep headline inflation above the 5.0% level.
Oct's headline inflation was up at 5.4% year-on-year (yoy) vs. 5.5% in Sep. Housing was up 9.9% yoy, while transport rose 10.5% as compared to 9.6% and 11.4% respectively in Sep. According to the Statistics Department, housing cost rose because of continued adjustments to the imputed rentals of owner-occupied accommodation, while higher COE premiums and petrol prices boosted private road transport costs. There was also no relief from food prices, which increased 3.5% yoy in Oct from 3.1% in Sep.
MAS core inflation measure (which excludes accommodation and private road transport) rose 2.3% monthon- month (mom) in Oct after easing to 2.1% in Sep. The higher core probably reflected the weakness in the Singapore dollar (which kept imported prices elevated) as well as higher public transportation costs in the month. We do not expect prices to spike or to re-hit the high of 5.7% yoy in Aug, though it should continue to hover around the 5.0% level.
Higher housing and transport costs should continue to underpin inflation for the rest of the year. As a result of the higher-than-expected headline inflation in Oct, we now expect headline inflation to come in 5.1% for 2011, slightly higher than our previous estimate of 5.0%.
Looking ahead, higher housing and transport costs should continue to put upward pressure on headline inflation in 2012. Moreover, food prices are likely to remain elevated in the near term as a consequence of the floods in Thailand and elsewhere. However, base effects and slower economic growth next year should provide some relief from price pressures. We should thus see headline inflation ease to 2.8% in 2012.
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