Singapore: Headline inflation seen at 5.0% in 2023 – UOB

Senior Economist at UOB Group Alvin Liew reviews the recently published CPI results in Singapore.

Key Takeaways

“Headline and core CPI inflation further converged in Dec (2022). Headline CPI rose by 0.2% m/m NSA in Dec (markedly slower from Nov’s +1.0% m/m jump). That sequential pace of increase translated into 6.5% y/y for headline CPI inflation in Dec (down from 6.7% in Nov), lowest print in 7 months (May 2022: 5.6%). But core inflation (which excludes accommodation and private road transport) continued to rise sequentially and at a faster pace of 0.6% m/m NSA (from +0.2% m/m in Nov), resulting in core inflation staying sticky at 5.1% y/y in Dec (same as Nov).”

“The sources of core inflationary pressures were again broad-based but two sources stood out: food and services rose further in Dec. The other notable component that added to core inflation was health care.  The retail & other goods and electricity & gas inflation stayed positive but slowed. As for the headline CPI inflation, other than upside to the core CPI, the accommodation costs increase stayed elevated, while private transport costs saw yet another further moderation, which explains why the headline CPI eased, but not core.”

“Inflation Outlook – The MAS projected core inflation “to stay elevated in the first half of this year before slowing more discernibly in H2 2023 as the current tightness in the domestic labour market eases and global inflation moderates.” It also kept its 2023 forecasts unchanged from the Oct 2022 Monetary Policy Statement. We also maintain our current set of forecasts, for headline inflation to average 5.0% and core inflation to average 4.0% in 2023 (from 6.1% and 4.1% respectively in 2022). Excluding the 2023 GST impact, we expect headline inflation to average 4.0% and core inflation average 3.0% in 2023.”