July 24, 2024
SINGAPORE – Consumer price rises here cooled more than analysts expected in June, with overall inflation hitting a three-year low and core consumer inflation, a more than two-year low.
Core inflation, which excludes private transport and accommodation costs to better reflect the expenses of households here, dropped to 2.9 per cent year on year, after sticking stubbornly to 3.1 per cent for the previous three months.
This is the lowest since March 2022, and below the 3 per cent tipped by analysts in a Bloomberg poll. The drop came on the back of lower inflation for retail, other goods and services.
Overall or headline inflation in June fell more sharply – to 2.4 per cent from 3.1 per cent in May – due to lower private transport costs.
This is the lowest rate since it hit that level in August 2021, and is also lower than the 2.7 per cent forecast in the Bloomberg poll.
On a month-on-month basis, which represents how much momentum there still is in prices, core inflation was unchanged in June, while headline inflation went down by 0.2 per cent.
The Ministry of Trade and Industry and Monetary Authority of Singapore (MAS) on July 23 maintained their estimates for core inflation in 2024 at 2.5 per cent to 3.5 per cent.
But they said the forecast range for overall inflation is “being reviewed” and will be updated in MAS’ next monetary policy statement, to be issued on July 26.
Bank of America Asia and Asean economist Ang Kai Wei said in a note that the June data does not necessarily point to any sharp slowdown in inflation momentum that would result in core inflation (in year-on-year terms) stepping down considerably over the next couple of months.
He added: “MAS signalled that the headline inflation forecast for 2024 will be revised in July 26’s monetary policy statement – we think the forecast will likely be lowered by 50 basis points to 2 per cent to 3 per cent (our forecast is tracking about 2.5 per cent). Changes to headline inflation forecasts should not be interpreted as signposts for potential policy changes.”
DBS economist Chua Han Teng said the softer core inflation number in June reinforces expectations that the underlying core disinflation or reduction in the rate-of-inflation trend remains intact.
He added that core inflation on a three month-on-three month percentage change on a seasonally adjusted annualised basis trended lower in June from its February peak.
OCBC chief economist Selena Ling said that in the light of the more rapid than expected dip in headline inflation in June, the bank’s full-year headline inflation forecast has been lowered to 2.6 per cent from the previous 2.8 per cent, while core inflation for the year is projected to come in at 2.9 per cent from the previous estimate of 3 per cent.
The June data showed that private transport costs recorded the steepest year-on-year drop of 0.7 per cent, from a 2.8 per cent rise in May. The fall was led by lower prices of cars and motorcycles, as well as a slower rise in petrol prices.
Inflation for retail and other goods came in at 0.5 per cent in June, down from 1.5 per cent in May, due to smaller increases in the prices of medicine, health products and personal effects. The prices of clothing and footwear fell more steeply.
Services inflation rose 3.4 per cent in June, easing from 3.6 per cent in May, on the back of a slower pace of increase in the cost of hospital services and holiday expenses.
Inflation for food remained unchanged at 2.8 per cent, while that of gas and electricity also stayed the same at 6.9 per cent.
Accommodation inflation in June was a touch lower, at 3.3 per cent, as housing rents rose at a more modest pace.