Singapore’s core inflation continued its decline in November to a three-year low, beating economists’ expectations, on the back of easing food and services costs.
Core inflation, which strips out private transport and accommodation costs to better reflect the expenses of households here, fell to 1.9 per cent year on year, from 2.1 per cent in October.
This is the lowest since November 2021, when core inflation was 1.6 per cent.
Economists polled by Bloomberg had estimated the median core inflation to be 2.1 per cent.
Overall – or headline – inflation rose to 1.6 per cent year on year in November, up from 1.4 per cent in October but lower than the Bloomberg poll of 1.8 per cent. The slight increase was led by a more gradual decline in private transport costs.
On a month-on-month basis, which shows the momentum in prices, both core inflation and overall inflation were unchanged.
Professor Lawrence Loh of the strategy and policy department at NUS Business School said the latest data “augurs well for us”.“We are back at how things were exactly three years ago, and we are now turning the curve and reaching a low and stable inflation, which indicates a healthy economy,” he said.
Economist Sheana Yue of Oxford Economics said that on a seasonally adjusted month-on-month basis, prices fell by 0.5 per cent from October, marking the largest decline in a year.
This dip was driven by a 1.9 per cent month-on-month fall in fuel prices.
“With the current Brent oil price largely in line with our forecast of US$72 to US$73 per barrel average over 2025, fuel prices are unlikely to be a decisive driver of inflation next year,” said Ms Yue.
Services inflation, which has been on a downward trend, “should slow further over the rest of 2024”, said the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) in their report on Dec 23.
MAS and MTI expect core inflation to remain below 2 per cent till end-2024.
They said core inflation is projected to average around 2.5 per cent to 3 per cent for the year, before stepping down further to 1.5 per cent to 2.5 per cent in 2025.
Prof Loh said the downward trend will continue in 2025, but may be at a slower pace.
“The Singapore economy can manage this level of price increase, because if it’s too low, sometimes it may mean that there are no jobs and people have no money to spend. So, a little bit of healthy inflation is natural,” he said.
Meanwhile, Ms Yue thinks MAS will not be easing its tight monetary policy settings in January 2025.
She said the Singapore dollar has continued to weaken since the start of October amid a strengthening US dollar.
As the US dollar is likely to remain strong, there will be further delays in MAS loosening its monetary policy.
UOB associate economist Jester Koh said the November data supports the bank’s base case for a slight reduction to the S$Neer slope by 50 basis points in the upcoming January monetary policy statement.
MAS uses the S$Neer, or Singapore dollar nominal effective exchange rate, to manage inflation here. It does this by buying or selling Singdollars.
Mr Koh added that he will not be surprised if MAS decides to keep the S$Neer band parameter settings unchanged.
In November, inflation for food and services edged down to 2.4 per cent and 2.2 per cent, respectively. This was because the cost of food services and holiday expenses rose at a slower pace, and there was a steeper decline in telecommunication services fees.
Accommodation inflation edged down to 2.4 per cent year on year, because of a smaller increase in housing rents.
Private transport inflation fell at a slower pace of 0.7 per cent year on year, from a quick pace of 2.5 per cent in October, due to a smaller decrease in car prices.
Electricity and gas inflation stayed unchanged at 2.5 per cent, while inflation for retail and other goods remained the same at 0.1 per cent.