Core inflation in Singapore rose for the second month in a row to 2.8% in September

SINGAPORE – Core consumer prices in Singapore rose slightly faster than expected in September, with core inflation rising for the second month in a row, official data showed on Oct 23.

Despite the rise in core inflation over the past two months, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) still expect it to continue its gradual downward trend and reach around 2 percent by the end of the year.

This goal, according to some economists, “looks ambitious” with only three months left to achieve it.

In September, core inflation, which excludes private transport and accommodation costs to better reflect household spending, rose to 2.8% year on year. That’s higher than economists’ forecast in a Reuters poll of 2.7%, which was also the rate in August.

This comes after core inflation fell to 2.5% in July, the lowest level in more than two years.

The September increase was driven by higher inflation in retail trade and other goods due to smaller declines in clothing and footwear prices.

Headline or overall inflation fell to 2 percent year-on-year in September from 2.2 percent in August. However, the headline figure was higher than the 1.9 percent forecast forecast by Reuters.

DBS Bank economist Chua Han Teng said this is the slowest pace of price growth in headline inflation since March 2021.

This comes as private transport spending fell 2.4%, sharper than the 1% fall in August, and lower gasoline prices. Meanwhile, housing inflation fell due to lower home rent growth.

Services inflation remained unchanged at 3.3 percent as falls in telecom rates were offset by large increases in tuition and other fees, vacation costs and health insurance.

Food inflation fell to 2.6 percent as rising prepared food prices were offset by a slowdown in prepared food price inflation.

On a monthly basis, core inflation fell to 0.1 percent in September, while headline inflation slowed to 0.3 percent.

This contrasts with August, when core inflation was 0.3 percent and headline inflation was 0.7 percent.

Maybank economists Chua Hak Bin and Brian Lee noted that core inflation has been resilient over the past two months, deviating from a “gradual downward trend” towards the 2 percent forecast by MAS by end-2024.

They said the local qualifying salary (LQS) increase in July could lead to higher wage costs, which could then be passed on to consumers. LQS is the minimum wage that employers hiring foreign workers must pay their local workers.