Singapore's inflation picks up pace

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Inflation picked up pace last month (Nov 2013), hit by the absence of rebates to Housing and Development Board households and higher Certificate of Entitlement (COE) premiums.

However, economists said the rise was expected and would not affect forecasts for price rises this year and next year.

The Consumer Price Index (CPI) for all items increased 2.6 per cent on-year last month, up from the 2 per cent seen in the previous month, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) said yesterday.

UOB economist Francis Tan said: “The main driver for inflation was higher accommodation costs compared to October, when there was disbursement of the Service and Conservancy Charges rebates that helped to lower overall housing costs. Additionally, higher COE premiums caused private road transport costs to edge higher.”

MAS Core Inflation, which excludes accommodation and private road transport costs, went up to 2.1 per cent last month, compared with 1.8 per cent in October.

With the outlook for this month remaining broadly similar to last month’s, the analysts expect the full-year CPI and Core Inflation to come in within the official forecasts of 2.5 to 3 per cent and 1.5 to 2 per cent, respectively.

But they cautioned that the tight labour market continues to pose risks.

Wages are expected to go up next year as the qualifying salaries for employment passes and foreign worker levies will increase in January and July, respectively.

The United States Federal Reserve’s decision to taper its stimulus may see the US dollar appreciating against its Singapore counterpart, leading to more expensive imports which may also be passed on to consumers.