Singapore inflation jumps to 10-year high in March on higher meals, services and transport prices

SINGAPORE – Consumer prices in Singapore noticed a spike final month on the again of higher meals, services and personal transport prices, with inflation hitting a 10-year high, in accordance to knowledge launched on Monday (April 25).

Core inflation – which excludes lodging and personal transport prices – jumped to 2.9 per cent in March on a year-on-year foundation, from 2.2 per cent the earlier month.

This topped the two.5 per cent rise forecast by economists in a Bloomberg ballot, and was the best fee seen since March 2012.

Core inflation is forecast to decide up additional in the approaching months, earlier than moderating in the direction of the top of the 12 months as among the exterior inflationary pressures ease, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) mentioned in a joint assertion on Monday.

Overall, client prices spiked by 5.4 per cent final month, extra than the 4.3 per cent enhance the month earlier than and the quickest tempo since April 2012.

On a month-on-month foundation, core inflation elevated by 0.7 per cent in March, whereas general client prices rose 1.2 per cent.

External inflationary pressures have intensified amid sharp will increase in world commodity prices and provide chain disruption, and these circumstances are seemingly to persist, MAS and MTI mentioned.

At the identical time, the labour market is anticipated to stay tight in Singapore and assist constant wage will increase over the 12 months.

“Amid improving demand, greater pass-through of accumulating business costs to consumer prices is likely to occur, keeping core inflation significantly above its historical average through the year,” the 2 companies mentioned.

In addition, general inflation is anticipated to decide up by greater than core inflation this 12 months, as personal transport and lodging inflation is anticipated to keep agency in the close to time period, they added.

Private transport inflation was up 21.5 per cent in March, in contrast with the 17.2 per cent enhance in February, due to a bigger enhance in automotive and petrol prices.

Food inflation rose 3.3 per cent 12 months on 12 months in March, up from the two.3 per cent enhance in February, because the prices of each non-cooked meals and meals services elevated at a quicker tempo.

Services inflation was higher at 2.6 per cent in March, in contrast with 2 per cent in February, primarily due to a bigger enhance in the price of different transport services and vacation bills. The prices of leisure and cultural services and point-to-point transport services additionally picked up extra strongly.

Electricity and fuel prices additionally rose at a quicker tempo of 17.8 per cent in March, in contrast with the 16.7 per cent enhance in February, with the common electrical energy prices paid by households beneath the open electrical energy market seeing a bigger enhance, towards the backdrop of higher world oil prices.

OCBC Bank chief economist Selena Ling famous that provided that the worldwide tide of hawkish central banks mountaineering rates of interest, it stays to be seen if the frontloading of financial coverage tightening will likely be sufficient to fight imported inflation or doubtlessly danger stagflation as the rise in prices damage enterprise and client confidence.

“On hindsight, this consumer price index print underscores the need for the aggressive twin tightening move by the MAS (earlier in April), and also explains why the window to further tightening (in its October policy statement) may not be closed just yet,” she mentioned. 

Earlier this month, Singapore’s central financial institution took a extra aggressive double-barrelled transfer to tighten financial coverage, in a bid to sluggish the inflation momentum.

It recentred the midpoint of the trade fee coverage band on the prevailing degree, and barely elevated the speed of appreciation of the coverage band.

MAS had additionally raised its inflation forecasts for 2022 in its coverage assertion, citing sharp positive factors in world commodity prices since late February and renewed provide chain disruptions led to by each the Ukraine warfare and the Covid-19 pandemic.

It expects core inflation to come in at 2.5 per cent to 3.5 per cent this 12 months, versus a previous forecast of two per cent to 3 per cent. Overall inflation is forecast at 4.5 per cent to 5.5 per cent, up from the sooner vary of two.5 per cent to 3.5 per cent.

Maybank analysts Chua Hak Bin and Lee Ju Ye mentioned in a report that foreign money appreciation might not be adequate to include the intensifying inflation pressures nor ease the tightness in the job market, and urged that overseas labour insurance policies and plans to introduce the native qualifying wage of $1,400 might have to be reviewed. 

“A supplementary budget may be necessary to ease the burden from the rising costs of living for lower-income households,” they added.

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