Singapore’s core inflation, which is closely monitored by the central bank to guide its monetary policy, eased for the third consecutive month in July, according to official data released on Wednesday. The core inflation rate, which excludes the costs of accommodation and private transport, fell to 3.8% year-on-year in July, matching the median forecast of a Bloomberg survey of 10 analysts. This was lower than the 4.2% recorded in June and the lowest since mid-2022.
Lower Electricity and Gas Prices
One of the main factors behind the moderation in core inflation was the decline in electricity and gas prices, which fell by 1.6% year-on-year in July, compared to a 3.1% increase in June. This was due to lower electricity tariffs that reflected the drop in global oil prices in the preceding quarter.
Slower Rise in Food and Retail Prices
Another factor that contributed to the easing of core inflation was the slower increase in food and retail prices. Food inflation edged down to 5.3% in July from 5.4% in June, as the prices of non-cooked food items rose at a more modest pace. Retail inflation also moderated to 2.6% in July from 2.9% in June, mainly reflecting smaller increases in the prices of clothing and footwear, household durables, and personal care products.
Stable Services Inflation
Services inflation, on the other hand, remained unchanged at 3.6% in July, as higher costs of medical and dental treatment were offset by lower costs of holiday travel and recreation. Services inflation has been relatively stable since the start of the year, reflecting the gradual recovery of domestic demand amid the easing of Covid-19 restrictions.
Lower Private Transport Inflation
Private transport inflation, which is excluded from the core measure but included in the headline measure, also eased in July, falling to 4.8% from 5.8% in June. This was mainly due to a slower rise in car prices, which have been affected by supply disruptions and strong demand amid the pandemic.
Higher Accommodation Inflation
Accommodation inflation, which is also excluded from the core measure but included in the headline measure, edged up to 4.6% in July from 4.5% in June. This was largely due to an increase in service and conservancy charges for public housing units from a year ago. Accommodation costs have been rising since late 2022, reflecting the recovery of the property market.
Outlook for Inflation
The Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) maintained their forecasts for overall and core inflation for 2023 at 4.5%-5.5% and 3.5%-4.5%, respectively. They noted that global supply chain frictions have largely eased, and energy and food commodity prices remain below year-ago levels. They also said that inflation in Singapore’s major trading partners has been on an easing trend, and that core inflation will likely moderate further over the next few months.