Singapore inflation stays negative in June but drop in overall consumer prices slows

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– Higher food helped keep inflation in the last month, with supply chain disruptions likely to keep exerting upward pressure on imported foodstuffs.

Core inflation, which excludes accommodation and private road transport costs, came in at minus 0.2 per cent in , unchanged from May. It was the fifth straight month of core prices being lower than a year ago.

This occurred as a steeper drop in the cost of services was offset by higher food inflation, as well as smaller declines in the costs of retail and other goods and electricity and gas.

But overall inflation eased to negative 0.5 per cent in June, from minus 0.8 per cent in May, according to data released by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) on Thursday (July 23).

This mainly reflected a smaller decline in private transport costs, MAS and MTI noted.

Private transport costs fell at a slower pace of 4.4 per cent in June, compared with the 6.8 per cent drop in May, due to smaller declines in car and petrol prices.

The cost of retail and other goods also recorded a smaller decline, at negative 1.8 per cent in June compared with minus 2.3 per cent the month before. This was as prices of clothing and footwear, and telecommunications equipment fell at a more gradual pace.

The cost of electricity and gas also fell at a slower rate, at negative 3.9 per cent in June over the minus 4.6 per cent in May, as the take-up of new subscriptions under the Open Electricity Market slowed.

But food inflation edged up, to 2.3 per cent in June from 2.2 per cent the preceding month, due to a larger increase in the prices of non-cooked food items.

Accommodation inflation was unchanged, at 0.5 per cent, as housing rents increased at a steady pace.

However services costs fell more sharply due to larger declines in holiday expenses and airfares.

They stood at minus 1 per cent in June, compared with negative 0.8 per cent in May.

MAS and MTI noted that in the quarters ahead, external sources of inflation are likely to remain benign amid weak global demand conditions.

“Oil prices should stay low for an extended period and will weigh on the prices of energy-related components in the CPI basket,” they said.

“At the same time, supply chain disruptions associated with international measures to contain the Covid-19 outbreak could continue to put some upward pressure on imported food prices.”

Domestically, subdued economic sentiment and weak labour market conditions will dampen consumer demand, thereby capping price increases for discretionary goods and services, they added.

“Cost pressures are likely to remain low as some degree of spare capacity in the economy emerges.”

Inflation is thus expected to remain subdued. Both core inflation and overall inflation are forecast to average between minus 1 per cent and 0 per cent this year.

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