Business

First positive inflation in 24 months, it's likely to continue


Inflation turned positive last month for the first time in over two years - a potent sign that prices are on track to climb at a faster pace this year on the back of recovering oil prices.

The consumer price index - the main measure of inflation - inched up 0.2 per cent last month compared with the same month a year earlier.

Though a tiny increase, this followed 24 straight months of sliding readings from November 2014 to October last year, and a reading of zero per cent in November.

Lower oil and car prices and falling accommodation costs - due to the soft property market - were the main drivers for the long bout of negative inflation.

However, prices of necessities such as education, food and healthcare continued to inch upwards in this period, which is why this run of falling prices is not regarded as "deflation".

Inflation is likely to continue rising on the back of higher global oil prices this year, the Trade and Industry Ministry and Monetary Authority of Singapore said yesterday.

Oil prices plunged in the second half of 2014 from above US$100 (S$142) a barrel to below US$50, due to oversupply, but have since risen to about US$55 a barrel.

This has already started having an impact. Last month's inflation uptick was led by higher private road transport costs, which increased 1.7 per cent due to costlier petrol and higher carpark fees.

Other consumer prices also rose, with services inflation edging up to 1.6 per cent, mainly due to a faster pace of increase in holiday expenses.

Food inflation was 2 per cent in December, while retail goods inflation eased to zero in December from 0.2 per cent in November.

Core inflation, which strips out accommodation and private road transport costs to better gauge everyday expenses, was 1.2 per cent in December, slightly lower than November's 1.3 per cent.

Core inflation for 2016 rose to 0.9 per cent from 0.5 per cent in 2015. Overall inflation came in at negative 0.5 per cent for the second consecutive year.

chiaym@sph.com.sg