Singapore: Pick-up in inflation seen as transitory – UOB

Economist at UOB Group Barnabas Gan assesses the latest release of inflation figures in Singapore.

Key Quotes

“Similar to inflation trends seen across Asia, Singapore’s consumer prices accelerated further to +2.4% y/y (+0.8% m/m nsa) in May 2021. This is the fifth straight month where the inflation rate strengthened from the previous reading. The increase in consumer prices was slightly higher compared to market estimate of +2.2% y/y (+0.4% m/m nsa). Moreover, headline inflation grew at its fastest pace since November 2013 (+2.6% y/y, +0.7% m/m nsa).”

“Despite the increase in headline inflation to its multi-year high, core inflation as a measure of consumer prices excluding private road transport and accommodation was benign at +0.8% y/y.”

“As discussed above, the rise in consumer prices in May 2021 is partially due to low base effects in May 2020, where overall prices plummeted to their weakest pace since May 2016 at -0.8% 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.”

“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. On the back of higherthan-expected inflation against market estimates since February 2021, we upgrade our headline inflation outlook to average +1.4% in 2021, up from our previous call of +1.0%. We keep our core inflation outlook at an average of +1.0% for this year.”