Mar 24, 2015

    4th month of deflation for S'pore as prices fall 0.3%

    A SOFT housing rental market and a fall in private road transport costs pushed inflation into negative territory for a fourth straight month in February, according to official data out yesterday.

    Consumer prices fell 0.3 per cent last month from the same period a year ago. The fall was sharper than the 0.2 per cent decline predicted by economists in a Bloomberg poll.

    But it was a touch higher than January's reading of minus 0.4 per cent.

    The last time Singapore experienced a prolonged drop in consumer prices - also known as deflation - was in 2009.

    The slight edging up in last month's inflation was due to higher food and services inflation, said the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) in joint comments.

    Reflecting the soft housing rental market, accommodation costs - which carry the heaviest weight in the consumer price index - fell 2.1 per cent last month, after falling 1.9 per cent the month before.

    Meanwhile, lower certificate of entitlement premiums brought private road transport costs down 5.8 per cent, after a 5 per cent drop in January.

    Core inflation - which excludes accommodation and private road transport costs, and is seen as a better gauge of daily expenses - rose 1.3 per cent last month from a year ago, due to stronger food and services inflation. In January, core inflation had risen 1 per cent.

    Food prices rose by 2.5 per cent compared to January's 2.2 per cent increase - a result of the seasonal pick-up in demand during the Chinese New Year period.

    Services inflation increased to 1.5 per cent from 1.2 per cent a month ago. This was largely led by the higher cost of holiday travel during the festive season, and the increase in tuition and other fees.

    MAS and MTI said that headline and core inflation "could ease further, before rising in the second half of this year on account of some recovery in global oil prices and base effects associated with the low inflation in last year's fourth quarter".

    They reiterated official forecasts; headline inflation and core inflation are projected to average minus 0.5 to 0.5 per cent, and 0.5 to 1.5 per cent, respectively.

    Yesterday's report may be the last inflation report before MAS' next biannual policy review next month. The central bank manages Singapore's exchange rate to control imported inflation.