Core inflation in Singapore increased to a 10-year high of 2.9 per cent year on year in March, up from 2.2 per cent in February, according to government statistics issued on Monday (Apr 25).
Core inflation recently stood at 2.9 percent year on year in March 2012.
The hike was prompted by greater food and service inflation, according to a joint statement from the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI).
The headline consumer price index, or total inflation, increased to 5.4% year on year in March, up from 4.3% in February.
Along with the increase in core inflation, private transport and accommodation inflation increased as well.
Core inflation does not include the cost of housing or private transportation. These products are eliminated because they are very susceptible to supply-side administrative regulations and are highly variable.
"External inflationary pressures have increased as a result of substantial rises in global commodity prices and repeated supply chain disruptions caused by both the Russia-Ukraine war and the regional epidemic," MAS and MTI said.
"In the short run, increased geopolitical threats and tight supply circumstances will maintain rising crude oil prices. Other commodities markets' supply-demand imbalances, as well as bottlenecks in global transportation and regional supply chains, are also expected to remain."
FOOD AND SERVICE PRICES INCREASE
Food inflation surged to 3.3 percent in March, up from 2.3 percent in February, as both non-cooked food and food services costs grew more rapidly.
Inflation in the services sector increased to 2.6 percent in March, up from 2% in February.
"Inflation in services was higher principally as a result of a greater rise in the cost of other transportation services and holiday costs," MAS and MTI said.
"At the same time, the expenses of recreational and cultural services, as well as point-to-point transportation, increased significantly."
With the implementation of vaccinated travel lanes, real air and sea travel expenses are gradually being integrated into the consumer price index, as opposed to the prior practice of imputed costs during periods of travel restriction owing to COVID19, according to MAS and MTI.
The consumer price index for other transport services, which includes flights and sea tickets, increased more sharply in March, owing in part to the inclusion of the expenses of required COVID19 tests associated with travel.
Inflation in private transport increased to 21.5 percent in March, up from 17.2 percent the previous month, owing to a greater rise in automobile and gasoline costs.
In March, housing inflation increased slightly to 3.5 percent from 3.3 percent in February, due to a greater rise in housing rent.
Retail and other goods inflation increased to 0.4% in March from 0.2% the previous month, owing to increases in the cost of telecommunications equipment and personal care items.
Recreational and cultural items, as well as alcoholic beverages and nicotine, all saw higher rises in price.
The inflation rate for electricity and gas jumped to 17.8% in March, up from 16.7% in February. Rates increased more rapidly as the average power costs paid by families in the Open Electricity Market increased more rapidly, despite rising global oil prices.
CORE INFLATION IS PROJECTED TO INCREASE FURTHER
Domestically, the labor market is likely to remain tight, allowing for a steady rate of wage growth throughout the year, according to MAS and MTI.
"As demand improves, a larger passthrough of accumulated business expenses to consumer prices is expected, maintaining core inflation considerably above its historical norm for the remainder of the year," they said.
Core inflation is expected to accelerate further in the coming months before decreasing near the end of the year as "some of the external inflationary pressures abate," according to MAS and MTI.
"However, upside risks to inflation persist as a result of recent geopolitical and pandemic shocks," they warned.
"However, with private transport and housing inflation likely to remain stable in the short future, headline inflation will accelerate this year faster than core inflation."
Core inflation is expected to average between 2.5 and 3.5 percent for the year, while total inflation will range between 4.5 and 5.5 percent.
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