A REPORT in last Thursday's Straits Times details how prices for some processed food have inched up. Keen shoppers might also have noticed how portions of pre-packed meat at the supermarket freezer section have shrunk in size; you pay about the same, but get less. Everything's going up. And this is confusing, given that prices rose earlier this year as oil costs headed for the stratosphere. But oil is far off its US$147 a barrel high; it is instead, trading around US$45 a barrel. So why is food getting pricey again? Well, for the same reason oil is down: the US dollar.
Earlier, rising oil prices - a result of the then shrinking US dollar - had driven up costs on every front, prompting food prices to rise in tandem. However, the dollar has now strengthened. And because oil is priced in dollars, it reacts inversely.
But now, it isn't oil prices influencing the price of food, but a direct relation with the US dollar. Singapore, which imports practically all its food, has much of this quoted in US dollars. So as the US currency goes up and the Singdollar down, the register at the supermarket rings a shriller note. This can't be helped. There is really nothing to do but to wait it out.
Yet, as much as consumer prices rightly concern Singaporeans, we might also want to pay attention to how companies are coping with imported materials. These too are likely to have taken a hit as a result of the higher US dollar. After coming down all this year, the non-oil Import Price Index, which measures the price of imported goods, rose slightly in October compared to a year ago. In the same month, the index for export prices continued to decline. The implication is that while suppliers may have been willing to absorb the cost from dearer oil, the rise in the US dollar has now passed higher costs to Singapore importers. Meanwhile, exporters continue to suffer from lower demand squeezing prices. The relationship between the two indexes should be watched for what it might tell us about the health of the Singapore economy and the jobs it supports. While consumer prices directly affect household budgets, how businesses fare in the face of the higher US dollar has deep implications for the economy and everyone's livelihood.
Eventually stock markets, currencies, demand and everything else will stabilise and return to trend. Until then, prudence dictates that one watches one's budget. And that goes for companies, too.