Image credits - The Straits Times
The latest figures released by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) on Friday, August 23, highlight a significant drop from June’s 2.9%. This decline reflects a broad slowdown in price increases across various sectors.
July saw a 0.1% monthly decline in core inflation, which is the measure of inflation that does not include the cost of lodging or private transportation. On the other hand, overall inflation stayed constant at 2.4% from June due to rising private transportation expenses offsetting lower lodging and core inflation. The core inflation rate in July is the lowest it has been since 2.2% in February 2022.
Price pressures in several important areas have eased, which has caused a slowing in core inflation. July’s year-over-year services inflation decreased to 2.9% from 3.4% in June, mostly as a result of a slower rise in holiday spending. A more moderate increase in home rents is reflected in the accommodation inflation, which decreased somewhat from 3.3% to 3.1%. Food services and non-cooked food had less rises, which helped to reduce food inflation to 2.7% from 2.8%. The inflation rate for retail and other goods decreased to 0.3% from 0.5%, with the decrease in prices linked to apparel, non-durable domestic goods, and personal items. Because power prices increased more slowly than gas and electricity, inflation in both categories decreased to 6.6% from 6.9%.
However, because of greater increases in gas prices and smaller declines in the prices of vehicles and motorbikes, private transport costs increased to 0.9% year over year in July, reversing a 0.7% decline in June.
According to MAS and MTI’s projections, core inflation will likely continue to decline through 2024’s third quarter before possibly slowing down even more in the fourth. Stable global energy costs, continuous labor market adjustments in Singapore, and a stronger Singapore dollar—which is anticipated to assist restrain import inflation—all support this anticipated trajectory. Core inflation is expected to average between 2.5% and 3.5% for the year, while CPI-All Items inflation is predicted to average between 2% and 3%. There are still risks to the inflation outlook, such as possible shocks from geopolitics.
The authorities also noted that an unexpected economic downturn could lead to greater easing of cost and price pressures, potentially influencing the inflation trajectory positively.