Singapore: Inflation risks look balanced

Barnabas Gan, Economist at UOB Group, comments on the latest inflation prints in Singapore.

Key Takeaways

“Singapore’s consumer prices rose by 2.4% y/y (+0.0% m/m nsa) in June 2021, similar to pace seen in the previous month. This is the sixth straight month where Singapore saw higher consumer prices from a year ago. The pace of inflation was slightly softer compared to market estimate of +2.5% y/y (+0.1% m/m nsa). Accounting for the latest data, Singapore’s consumer prices rose 1.5% in 1H21.”

“Official estimates for headline inflation has been revised higher to a range of between 1.0% and 2.0% for 2021, from a previous outlook of between 0.5% and 1.5%. According to the joint press release by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI), higher global oil prices and producer price indices had lifted Singapore’s external inflation. Nonetheless, official core inflation outlook is left unchanged at a range of between 0.0% and 1.0% for this year.”

“Inflationary pressures will likely stay transitory for the year ahead.”

“In a nutshell, consumer prices stayed elevated in June 2021, in part due to low base effects.”

“We feel that the risk for inflation in 2021 is balanced. Higher external inflation amid higher commodity prices and strong energy demand could continue in the latter half of 2021, although potentially higher global oil supply in 2H21 may limit the upward price pressures then. Increased COVID-19-led risks and social restrictions suggest the persistence of negative output gaps seen in some of Singapore’s key trading partners, which will likely cap import prices pressures.”

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