SINGAPORE: Household expenses in Singapore rose in August 2024, as core inflation, a key measure excluding private transport and accommodation, increased to 2.7% year on year.
This followed a surprise decline in July, when core inflation dropped to 2.5%, marking its lowest level in over two years.
According to a joint statement issued by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI), the uptick in inflation was primarily driven by rising service costs.
Services inflation accelerated to 3.3% in August, up from 2.9% in July, driven by an increase in holiday-related expenses while airfares recorded smaller declines.
Overall or headline inflation, which includes all sectors, fell slightly to 2.2% year on year in August, down from 2.4% in July.
This decline was mainly due to a reduction in private transport prices, which offset the rise in core inflation.
Month-on-month figures, however, point to continued price pressures, with core inflation increasing by 0.3% and overall inflation by 0.7% during the same period.
MAS and MTI indicated in their inflation report on 23 September that despite some volatility in service costs, notably in overseas travel, services inflation is expected to moderate further in the coming months.
The strengthening Singapore dollar, which is gradually appreciating in trade-weighted terms, is likely to help control imported inflation as the year progresses.
The two agencies maintained their inflation forecasts for 2024. Core inflation is projected to average between 2.5% and 3.5%, while overall inflation is expected to remain in the range of 2% to 3%.
Among other spending categories, inflation in retail and other goods edged up to 0.4% in August, driven by a rise in household durables. Food inflation remained unchanged at 2.7%, as an increase in non-cooked food prices was offset by a reduction in food services inflation.
The report also noted that electricity and gas inflation held steady at 6.6% in August, as a smaller increase in electricity prices was balanced by a larger rise in gas prices. Accommodation inflation, meanwhile, eased slightly to 2.9%, reflecting a slower increase in housing rents.
Private transport prices fell by 1% in August, a reversal from the 0.9% increase recorded in July. This was attributed to a steeper decline in car prices, although petrol prices rose at a slower rate.
Looking ahead, MAS and MTI expect inflation to continue its moderating trend for the rest of 2024.
Global energy prices have been falling, and Singapore’s imports of intermediate and final manufactured goods are on a general downward trajectory.
Locally, increases in labour costs are slowing, and businesses are expected to pass these earlier cost increases to consumers at a reduced pace.
Private transport inflation is projected to decrease further as Certificate of Entitlement (COE) supply increases. Similarly, accommodation inflation should ease as more housing units become available for rent throughout the year.
However, MAS and MTI said risks to the inflation outlook remain.
Stronger-than-expected labour market performance could reignite wage growth, while global factors, such as fresh geopolitical shocks or adverse weather, could place renewed upward pressure on energy and food prices.
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