Singapore core inflation drops to 4-year low of 0.5% in March

Singapore's core inflation dropped for a sixth consecutive month in March as most spending categories saw smaller year-on-year price increases.

Prices also fell for two categories - electricity and gas, and retail and other goods - the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said in a joint report on April 23.

Core inflation, which excludes private transport and accommodation costs to better reflect the expenses of households here, eased to 0.5 per cent year on year, from 0.6 per cent in February.

This is the lowest for the key inflation gauge since March 2021. It also came in lower than a Bloomberg poll forecast of 0.7 per cent.

Overall - or headline - inflation remained unchanged at 0.9 per cent year on year in March, due to higher private transport inflation which offset the fall in core inflation.

But the figure also came in lower than the 1.1 per cent forecast in the Bloomberg poll.

MAS and MTI noted that Singapore's imported inflation is expected to remain moderate.

"Although the escalation in trade conflicts could be inflationary for some economies, their impact on Singapore's import prices is likely to be more than offset by the disinflationary drags exerted by weaker global demand," they said.

MAS and MTI also said that unit labour costs are expected to rise gradually, as nominal wage growth slows while productivity increases.

Increased government subsidies for essential services like public healthcare, pre-school education and public transport will also help keep services inflation in check.

"The risks to inflation are tilted towards the downside given heightened uncertainties in the external environment," they said.

MAS on April 14 lowered its core inflation forecast for 2025 to 0.5 per cent to 1.5 per cent, down from the 1 per cent to 2 per cent range predicted in January.

Electricity and gas prices dropped 3.5 per cent in March, after falling 3.1 per cent in February. The report noted that global crude oil prices are projected to be lower compared to 2024 amid slowing global demand and ample supply conditions.

The cost of retail and other goods dropped 0.5 per cent in March, after falling 0.4 per cent in February. This is due to larger declines in the prices of information and communication equipment as well as household appliances.

Private transport costs rose 2.1 per cent in March due to larger increases in car prices, up from 1.6 per cent in February.

Food inflation edged up in March, rising to 1.3 per cent from 1 per cent in February, driven by higher prices for non-cooked food and prepared meals.

Services inflation eased to 0.6 per cent in March from 0.8 per cent in February. This was due to a steeper decline in the cost of information and communication services and a more modest increase in point-to-point transport fares.

Accommodation inflation rose at a slower pace at 1.4 per cent in March from 1.6 per cent in February. This was due to smaller increases in housing rents.

Ms Sheana Yue, an analyst at research house Oxford Economics, said that deflationary price pressures to are expected to persist in 2024.

"An open and trade reliant economy like Singapore will be affected by weak underlying global demand, which will keep core inflation here muted," she said.

"On balance, we expect headline inflation to average 0.7 per cent this year from 2.4 per cent last year and for core inflation to average 0.6 per cent from 2.6 per cent - this will provide sufficient space for the MAS to loosen policy settings again if necessary to support Singapore's economy."