Singapore: Inflation risks remain benign – UOB

Barnabas Gan, Economist at UOB Group, reviews the recently published inflation data in Singapore.

Key Quotes

“Singapore’s consumer price index rose for the fourth straight month at +1.3% y/y (+0.2% m/m nsa) in March 2021. The increase in consumer prices were faster than market estimate of +1.2% y/y (+0.2% m/m nsa). Moreover, headline inflation grew at its fastest pace since July 2014 (+1.3% y/y, -0.3% m/m nsa), while core inflation accelerated to +0.5% y/y in March 2021, up from February’s +0.2% level.”

“The latest rise in inflation was not a surprising phenomenon, considering higher global oil prices (Brent: +143.0% y/y in March 2021).”

“The firming of economic growth in Singapore likely supported higher consumer prices as well.”

“We reiterate that the higher core inflation seen since February 2021 suggests that the reintroduction of higher prices in Singapore’s basket of goods and services may affect the day-to-day outlay of most Singaporean households.1 Nonetheless, the climb in prices has been relatively slow when compared to the average 10y- headline and core inflation rate of 1.7% and 1.5% in the periods between 2010 and 2019. For the rest of the year, we continue to expect inflation risks to stay benign as business costs pressures remained contained amid slow wage growth given the continued slack in Singapore’s labour market.”