Singapore’s inflation hits eight-month high

Inflation here jumped to an eight-month high last month, caused mainly by a spike in certificate of entitlement (COE) prices.

Inflation rose by 4.9 per cent last month from a year earlier, a sharp jump from January’s 3.6 per cent, the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said yesterday.

This was the highest year-on-year increase since the 5.3 per cent in June last year.

Private road transport costs, fuelled by rising COE prices, surged 17.4 per cent last month. This alone accounted for more than two-thirds of the 1.3 percentage point rise in overall inflation last month, noted MAS and MTI.

DBS economist Irvin Seah said: “The COE premiums on average were about 25 per cent higher than they were back in the same period last year.”

Most economists tip overall inflation to ease in the coming months, if COE premiums continue to weaken as a result of curbs on car loans introduced late last month.

Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam told Parliament recently in his Budget round-up speech that the curbs were necessary to keep a lid on inflationary pressures and rein in borrowing by car buyers.

CIMB economist Song Seng Wun said: “The good news is that February’s inflation is likely the peak for this year.”

UOB economist Francis Tan said: “The lagged impact from slower economic growth over the past few quarters in Singapore may further ease price pressures.”

But MAS and MTI warned that the persistent tight labour market will result in wage increases this year, some of which will be passed on to consumers through higher prices.

Singapore Business Federation chief operating officer Victor Tay said: “The No. 1 concern has been rising business costs, such as rental and manpower costs. We expect transport costs to moderate, given the recent Budget measures.”

MAS and MTI added that core inflation, which excludes accommodation costs and private road transport prices, rose to 1.9 per cent last month from 1.2 per cent in January.

Another measure of inflation – consumer price index less imputed rentals on owner-occupied accommodation – rose 4.6 per cent, reflecting higher private road transport costs.

Food cost inflation was higher at 2.3 per cent, up from January’s 1 per cent, as Chinese New Year fell in February.

But the rise in accommodation costs eased to 5.9 per cent compared with the previous month’s 6.1 per cent, as market rents saw a slightly smaller increase.

MAS and MTI kept this year’s full-year inflation forecast at between 3.5 per cent and 4.5 per cent.

MAS is tipped to maintain a policy allowing a modest and gradual appreciation of the Singapore dollar at next month’s policy meeting.