Official statistics issued on Monday (May 23) revealed that Singapore's core inflation increased to 3.3% year-over-year in April from a 10-year high of 2.9% in March, spurred by higher energy and food expenses.
This is the highest level of core inflation since January 2012, when it reached 3.5%.
The Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) stated in a joint announcement that the increase was driven by increased inflation for food, retail and other items as well as energy and gas.
The headline consumer price index, or overall inflation, remained unchanged at 5.4% year-over-year in April, as private transportation inflation slowed.
Core inflation excludes accommodation and private transportation expenses, which are typically highly impacted by supply-side administrative policies and highly volatile.
INFLATION PICKS UP FOR MOST SECTORS
According to MAS and MTI, food inflation climbed from 3.3% in March to 4.1% in April as prices of uncooked food and food services grew at a faster rate.
The rate of inflation for retail and other items accelerated in April, rising to 1.6% from 0.4% in March, as clothes and footwear prices surged.
The electricity and gas inflation rate increased to 19.7 percent in April, up from 17.8 percent in March, due to bigger increases in electricity and gas rates due to higher fuel prices.
Meanwhile, services inflation declined marginally to 2.5%, from 2.6% in March, as "airfares reduced due to the easing of COVID-19 test criteria for travel into Singapore and other travel destinations," according to MAS and MTI.
Accommodation inflation increased from 3.5% to 3.9% "owing to a faster rate of growth in housing rentals," while private transportation inflation decreased from 21.5% to 18.3% due to lesser increases in automobile prices.
External inflationary pressures remain significant, according to MAS and MTI, due to elevated global commodity prices and persistent supply chain frictions caused by the Russia-Ukraine war and the regional pandemic.
"Enhanced geopolitical concerns and constrained supply circumstances will keep crude oil prices rising in the foreseeable future," the report concluded.
Due to supply-demand mismatches and bottlenecks in global transportation and regional supply chains, it is anticipated that prices for other commodities, such as food, would also remain high.
Domestically, the labor market is anticipated to "remain tight and maintain a brisk rate of wage growth throughout the year."
As demand recovers, there will likely be a larger pass-through of accumulated company expenses to consumer prices, maintaining core inflation "well above the historical norm throughout the year."
According to MAS and MTI, core inflation is expected to increase higher in the coming months. At the end of the year, though, "some of the external inflationary pressures are projected to abate."
However, they noted that there are still upside risks, such as geopolitical and pandemic-related shocks.
"With private transport and housing inflation projected to remain high in the foreseeable future, headline inflation will exceed core inflation this year," they said.
Core inflation is estimated to average between 2.5% and 3.5% for the year, while headline inflation is anticipated to range between 4.5% and 5.5%.
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