Below expectations: A customer at a fruit stall at a wet market in Singapore. Official data shows that core inflation came in at 3.1% year-on- year in January, lower than the 3.6% forecast in a Reuters poll of economists. — Bloomberg
SINGAPORE: Consumer prices have eased in January on the back of lower services and food inflation, beating analysts’ estimates in a surprise development.
But the Trade and Industry Ministry (MTI) and the Monetary Authority of Singapore (MAS) cautioned that core inflation is expected to pick up in February – a warning also given by some analysts.
Official data released on Feb 23 showed that core inflation, which excludes private transport and accommodation costs to better reflect the expenses of households here, came in at 3.1% year-on- year in January, lower than the 3.6% forecast in a Reuters poll of economists.
The easing came despite the rise in goods and services tax (GST) to 9% in January 2024 from 8% in December 2023.
The January figure, led by a slower rise in prices of services and food, is slightly lower than the 3.3 % in December, the level at which core consumer prices have hovered around for months.
Overall or headline inflation fell sharply to 2.9% year-on-year in January, from 3.7% in December, beating the Reuters forecast of 3.8%.
The easing of headline consumer prices is led by a decline in both accommodation and private transport inflation.
MTI and MAS said core inflation is expected to pick up in February, which would reflect the effects of the Chinese New Year (CNY).
They added: “Thereafter, core inflation should resume a gradual moderating trend over the rest of the year as import cost pressures continue to decline and tightness in the domestic labour market eases.”
Maybank economist Chua Hak Bin described core inflation in January as “unexpectedly tame” given the hike in the GST, carbon taxes and other administrative prices.
He said the drop in headline inflation was less of a surprise, and that the timing of the CNY holidays may have distorted the inflation picture.
“Looking at the combined January and February average inflation should provide a more reliable assessment on whether inflation pressures are indeed easing so quickly,” Dr Chua added.
DBS Bank economist Chua Han Teng said January’s core inflation marked the lowest point since early 2022.
Following January’s moderation, he expects a higher core inflation in February, with food being one category that has higher year-on-year price pressures due to the Chinese New Year effect. — The Straits Times/ANN
