Singapore: Inflation accelerated in June – UOB

Senior Economist at UOB Group Alvin Liew reviews the lates publication of inflation results in Singapore.

Key Takeaways

“Singapore’s headline CPI rose much faster than expected, at 1.0% m/m, 6.7% y/y in Jun (from 1.0% m/m, 5.6% y/y in May), fastest y/y print since Sep 2008. Core inflation (which excludes accommodation and private road transport) also rose at a faster clip, up by 4.4% y/y (from 3.6% in May), fastest since Nov 2008.”

“The sources of price pressures for core inflation were again broad-based including almost all the major categories. As for the headline CPI inflation, other than upside to the core CPI, both the accommodation costs and private transport costs were also the key drivers of overall price increases. Transport component continued to lead, contributing an outsized 3.4ppts to the 6.7% inflation print, followed by housing & utilities (1.3ppt) and food (1.2ppt). Communication cost was the only major component of CPI which saw a fall in prices, but its ‘contribution’ was fairly insignificant.”

“In its outlook, the MAS projected core inflation to peak in 3Q and ease towards end-2022, but the warnings on inflation developments remain on the upside, both on the external (‘upward pressure on Singapore’s import prices are expected to persist’) and domestic fronts (tight labour market conditions and businesses to pass higher costs to consumer prices here).”

“We now expect headline inflation to average 6.0% (up from previous forecast of 5.0%) and core inflation at 4.2% (up from previous forecast of 4.0%) in 2022. Our latest forecasts are at the top end of the official outlook for headline CPI (5.0-6.0%) but still exceeds the revised official core inflation forecast range (3.0-4.0%), and with the risks still tilted to the upside, as the MAS rightly highlighted the ‘risks to inflation from fresh shocks to global commodity prices, as well as domestic wage pressures’.”