Singapore: CPI extends the uptrend in April – UOB

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

Key Quotes

“Singapore’s consumer price index rose for the fifth straight month to +2.1% y/y (-0.2% m/m nsa) in April 2021, from +1.3% y/y (+0.2% m/m nsa) in March. The increase in consumer prices were slightly higher compared to the market estimate of +2.0% y/y (-0.2% m/m nsa). Moreover, headline inflation grew at its fastest pace since May 2014 (+2.3% y/y, +0.3% m/m nsa), while core inflation accelerated to +0.6% y/y in April 2021, up from March’s +0.5% level.”

“Inflation was primarily driven by higher transport cost, led by higher global oil prices to-date.”

“In the same vein, higher energy prices also resulted in the increase of electricity and gas tariffs for households in April 2021.”

“On the flipside, the absence of tourism-led demand continued to pressure retail prices lower.”

“Note that the rise in consumer prices in April 2021 may be due to low base effects in April 2020, where overall prices plummeted to its weakest pace since May 2016 at -0.7% y/y. Moreover, Singapore saw a persistent deflation environment in the period between April and November 2020, on the back of a relatively weaker economic environment and low oil prices then. As such, the rise of consumer prices may continue to be observed in the months ahead, although it is expected to be transient when the base effects eventually dissipate.”

“Official estimates kept headline inflation at a range between 0.5% and 1.5%, while core inflation is forecast at between 0.0% and 1.0% for 2021. This is against our outlook for both headline and core inflation is for them to average 1.0% in 2021, and this would translate to headline inflation for 1H21 and 2H21 at an average of +1.2% and +1.0%, respectively.”