Consumer spending: People queue outside an Apple shop outlet in Singapore. Prices of retail and other goods fell at a slower pace of 0.2%, after falling 0.5% in July, while those of telecommunications equipment registered a smaller decline. — AFP
SINGAPORE: Consumer price pressures in Singapore ease more than expected in August, with year-on-year (y-o-y) core inflation falling to its lowest since February 2021.
While economic uncertainty and government subsidies have lowered inflation, some economists expect inflation to rise from the fourth quarter of 2025 (4Q25), given factors such as rising certificate of entitlement premiums and falling interest rates.
In August, core inflation dropped for the second month in a row to 0.3% y-o-y, from 0.5% in July, the Monetary Authority of Singapore (MAS) and Trade and Industry Ministry (MTI) said in their joint report on Tuesday.
The reading came in lower than the 0.5% forecast by economists in a Bloomberg survey.
Core inflation excludes private transport and accommodation costs to better reflect the expenses of households here.
Overall – or headline – inflation was 0.5%, down from 0.6% in July, owing to lower accommodation inflation and core inflation.
The economists polled had forecast no change in the gauge.
MAS and MTI said Singapore’s imported inflation should remain moderate in the near term as inflationary effects from ongoing trade conflicts are likely to be offset by weaker global demand.
“Global crude oil prices remain below year-ago levels, while food commodity price increases should also stay contained.
“On the domestic front, slower nominal wage growth and continuing increases in labour productivity should contribute to a moderation in unit labour costs,” they said.
“At the same time, enhanced government subsidies for essential services will continue to dampen services inflation.”
MAS and MTI stuck to their forecasts that core and overall inflation will average 0.5% to 1.5% in 2025.
DBS Bank senior economist Chua Han Teng said low inflation in 2025 marks significant relief from the elevated price increases of the past few years, amid an uncertain and volatile economic landscape that could bring potential job disruptions.
“The pass-through of business costs to consumer prices has stayed contained due to moderate domestic labour cost pressures amid restrained wage increments given elevated economic uncertainty,” he said.
He added that government subsidies have also helped to contain essential services inflation.
Maybank economists Chua Hak Bin and Brian Lee said the downward pressure on core inflation in recent months stemmed mostly from external factors and domestic subsidies, rather than weakening demand.
“Consumer demand remains resilient despite economic uncertainty, cushioned by optimism from the rising stock market and property prices, as well as the government’s Community Development Council (CDC) vouchers and other cost-of-living support,” they said.
OCBC Bank’s chief economist Selena Ling, however, said CDC vouchers are likely to mitigate or offset the larger expected cooling in domestic demand rather than affect inflation directly.
She noted that the current low inflation situation points to a modest pullback in demand conditions, given the softening in the local labour market and external headwinds such as tariffs and the growth slowdown in major economies like the United States and China.
“This will also weigh on business confidence and indirectly affect businesses’ ability to raise prices to end-consumers,” she said.
“There is likely another factor, which is that US tariffs may be contributing to a rerouting of Chinese exports away from the United States and an influx into the rest of the world, including Singapore, so the increased competition drives prices lower.”
Ling added that core and headline inflation may edge higher in 4Q25, reversing 3Q25’s weak inflation numbers.
“That said, there is some downside risk, so I will shade down slightly my 2025 headline and core consumer price index forecasts to 0.8% and 0.6% y-o-y, respectively.” — The Straits Times/ANN
