Singapore core, overall inflation stay negative in May amid circuit breaker measures

SINGAPORE – Core consumer prices contracted for a fourth straight month in May amid Singapore’s circuit breaker measures to stem the Covid-19 outbreak, but the year-on-year drop was less than in April due to smaller declines in the costs of services and electricity as well as higher food inflation.

Core inflation, which excludes accommodation and private road transport costs, registered at minus 0.2 per cent in May, according to data released by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) on Tuesday (June 23).

This was slightly better than April’s minus 0.3 per cent.

Overall inflation, which fell below zero in April for the first time since October 2016, came in at minus 0.8 per cent year on year last month.

This was mainly due to a larger decline in private transport costs, attributed to a larger fall in car and petrol prices.

The continued suspension of Electronic Road Pricing charges also lowered private transport costs, the MAS and MTI said.

Meanwhile, the cost of retail and other goods fell more sharply in May compared with April, declining 2.3 per cent year on year last month.

This was due to steeper falls in the prices of clothing and footwear, medical products and household durables.

Inflation in personal care products also turned negative, the two agencies noted.

Meanwhile, the overall cost of services fell at a more gradual pace in May – at minus 0.8 per cent year on year, compared with minus 1.1 per cent in April – due to smaller declines in holiday expenses and air fares.

Food inflation edged up slightly, coming in at 2.2 per cent year on year last month, due to a larger increase in the prices of non-cooked food items.

On the other hand, the pace of decline in the cost of electricity and gas eased, as new subscriptions under the Open Electricity Market slowed.

Accommodation inflation was unchanged at 0.5 per cent year on year, as housing rents rose at a steady pace.

External sources of inflation are likely to remain benign amid weak global demand conditions in the quarters ahead, the MAS and MTI said, with oil prices expected to stay low for an extended period.

“At the same time, supply chain disruptions associated with international measures to contain the Covid-19 outbreak could continue to put some upward pressure on imported food prices.”

Domestically, subdued economic sentiment and weak labour market conditions will dampen consumer demand, capping price increases for discretionary goods and services, and cost pressures are likely to remain low.

The MAS core inflation and overall consumer price index are forecast to average between minus 1 and 0 per cent this year.

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