Business

Low-income households benefited most from lower inflation


Low-income households benefited most from lower inflation in the second half of last year, according to data out yesterday.

The middle 60 per cent also experienced lower inflation but to a smaller extent, Statistics Department data showed.

The consumer price index - the main measure of inflation - for general households declined 0.2 per cent over July to December compared with the corresponding period a year earlier.

The index for the lowest 20 per cent fell 0.8 per cent, the largest decline across income groups.
This was due to a fall in accommodation costs and electricity tariffs, which had a more significant impact as these items accounted for a higher share of this group's total expenditure.

The lowest 20 per cent income group also experienced a smaller increase in the cost of healthcare services compared with other income groups, taking into account government subsidies and support for MediShield Life premiums.

Those in the middle 60 per cent experienced a smaller 0.3 per cent fall in their consumer price index in the second half of 2016 compared with the same period a year earlier.

Households in the highest 20 per cent income group saw no change in their index as the impact of lower accommodation costs and electricity tariffs was offset by higher food prices, tuition fees and road tax.

Inflation for general households fell by 0.5 per cent for the whole of 2016. Households in the lowest 20 per cent by income experienced a 1.1 per cent decline in their consumer price index, while the middle 60 per cent and highest 20 per cent saw a decline of 0.5 per cent each.

Lower-income households have benefitted most from government transfers and subsidies, said OCBC economist Selena Ling. While inflation is expected to inch up this year due to higher oil prices, the impact on different income groups will depend on government measures announced in next month's Budget, she added.

"Hopefully, there will be some mitigating measures to provide a relief valve for cost pressures - eg. rental rebates for hawker centres and HDB heartland shops to keep costs down."

chiaym@sph.com.sg

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