Singapore core inflation eases to 2.5% in July, lowest in more than two years

SINGAPORE: Singapore’s core inflation in July fell to its lowest in more than two years, driven by slower price increases across the board.
Core inflation came in at 2.5 per cent year-on-year in July, according to official data released by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) on Friday (Aug 23).
This is a dip from June’s 2.9 per cent and the lowest since February 2022, when it stood at 2.2 per cent.
A Reuters poll had forecast a figure of 2.9 per cent for July.
Overall or headline inflation in July remained unchanged at 2.4 per cent year-on-year compared with June, as a slowdown in accommodation and core inflation was offset by a pickup in private transport costs. 
Core inflation excludes accommodation and private transport.
On a month-on-month basis, the core consumer price index (CPI) fell by 0.1 per cent, while the overall CPI fell by 0.3 per cent.
Services inflation moderated largely to 2.9 per cent year-on-year in July, from 3.4 per cent year-on-year in June, on the back of a slower pace of increase in holiday expenses.
Accommodation inflation was slightly lower at 3.1 per cent year-on-year in July, from 3.3 per cent in June, as housing rents rose at a more modest pace. 
Food inflation edged down to 2.7 per cent year-on-year in July, from 2.8 per cent in June, due to smaller increases in the prices of both non-cooked food and food services.
Retail and other goods inflation eased to 0.3 per cent year-on-year in July, from 0.5 per cent in June, as the prices of clothing, non-durable household goods and personal effects fell.
Electricity and gas inflation moderated to 6.6 per cent year-on-year in July, from 6.9 per cent in June, on account of a smaller increase in electricity prices.
Private transport costs picked up to 0.9 per cent year-on-year in July, reversing from -0.7 per cent year-on-year in June, due to smaller declines in the prices of cars and motorcycles alongside a steeper increase in petrol prices.
The authorities noted that the global prices of energy and most food commodities have remained relatively stable in recent months.
“The costs of Singapore’s imported intermediate and final manufactured goods have also continued to be on a broad decline,” said MAS and MTI.
“Inflation for services associated with overseas travel has moderated and should ease further over the course of the year as the air transport and hospitality sectors around the world restore supply.”
The “gradually strengthening” Singdollar trade-weighted exchange rate should also continue to temper Singapore’s imported inflation in the coming months.
Within Singapore, increases in unit labour costs have slowed in tandem with the cooling labour market.
However, businesses are likely to continue passing the earlier increases in labour costs to consumer prices, albeit at a reduced pace, said MAS and MTI. 
The authorities said they expect core inflation to stay on a gradual moderating trend over the rest of the third quarter of the year, and step down further in the fourth quarter.
Private transport inflation is expected to moderate from last year amid the bigger projected COE supply this year. Similarly, accommodation inflation should continue to ease as the supply of available housing units for rental increases over the course of the year.
For the year as a whole, core inflation is forecast to average 2.5 per cent to 3.5 per cent, while CPI-All Items inflation should average 2 per cent to 3 per cent.
“Excluding the transitory effects of the 1 percentage point increase in the GST rate to 9 per cent, both core and CPI-All Items inflation are expected to come in at 1.5 per cent to 2.5 per cent,” said MAS and MTI.
Risks to the inflation outlook remain, as fresh geopolitical shocks, adverse weather events and renewed transportation disruptions globally could exert “upward pressure” on global energy and food commodity prices, as well as shipping costs. 
Local “stronger-than-expected” labour market conditions could also cause a re-acceleration of wage growth, they added.
“Conversely, an unexpected weakening in the global economy could induce a greater easing of cost and price pressures.”