SINGAPORE: Singapore’s core inflation rose to a 10-year high of 2.9 per cent year-on-year in March, up from 2.2 per cent in February, official data released on Monday (Apr 25) showed.
The last time core inflation was at 2.9 per cent year-on-year was in March 2012.
The increase was driven by higher inflation for food and services, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) said in a joint release.
March's headline consumer price index, or overall inflation, came in at 5.4 per cent year-on-year, up from 4.3 per cent in February.
In addition to the pick up in core inflation, private transport and accommodation inflation also came in higher.
Core inflation excludes accommodation and private transport costs. These items are excluded as they tend to be significantly influenced by supply-side administrative policies and are volatile.
"External inflationary pressures have intensified amid sharp increases in global commodity prices and renewed supply chain disruptions driven by both the Russia‐Ukraine conflict and the regional pandemic situation," said MAS and MTI.
"In the near term, heightened geopolitical risks and tight supply conditions will keep crude oil prices elevated. Supply‐demand mismatches in other commodity markets, as well as bottlenecks in global transportation and regional supply chains, are also likely to persist."
PRICES INCREASE FOR FOOD AND SERVICES
Food inflation rose to 3.3 per cent in March compared to 2.3 per cent in February as the prices of both non-cooked food and food services increased at a faster pace.
Services inflation went up to 2.6 per cent in March, compared to 2 per cent in February.
"Services inflation was higher primarily due to a larger increase in the cost of other transport services and holiday expenses," said MAS and MTI.
"At the same time, the costs of recreational and cultural services and point‐to‐point transport services also picked up more strongly."
With the introduction of vaccinated travel lanes, actual air and sea travel costs are being progressively incorporated into the consumer price index, compared to the previous approach of imputing them when travel was limited due to COVID‐19, said MAS and MTI.
The consumer price index for other transport services, which includes both airfares and sea fares, rose more steeply in March, reflecting in part the inclusion of the costs of travel‐related mandatory COVID‐19 tests.
Private transport inflation rose to 21.5 per cent in March from 17.2 per cent the preceding month, on the back of a larger increase in car and petrol prices.
Accommodation inflation rose slightly to 3.5 per cent in March from 3.3 per cent in February, alongside a larger increase in housing rent.
Retail and other goods inflation ticked up to 0.4 per cent in March from 0.2 per cent the preceding month, as the cost of telecommunication equipment and personal care products went up.
Prices of recreational and cultural goods, as well as alcoholic drinks and tobacco, also recorded steeper increases.
Electricity and gas inflatino increased to 17.8 per cent in March, up from 16.7 per cent in February. Prices rose at a faster pace as the average electricity prices paid by households under the Open Electricity Market saw a larger increase, against the backdrop of higher global oil prices.
CORE INFLATION FORECAST TO GO UP FURTHER
Domestically, the labour market is expected to remain tight and support a firm pace of wage increases over the year, MAS and MTI said.
“Amid improving demand, greater pass‐through of accumulating business costs to consumer prices is likely to occur, keeping core inflation significantly above its historical average through the year,” they added.
Core inflation is forecast to pick up further in the coming months before moderating towards the end of the year as “some of the external inflationary pressures recede”, said MAS and MTI.
"However, there remain upside risks to inflation from the recent geopolitical and pandemic‐related shocks," they added.
“Meanwhile, with private transport and accommodation inflation expected to stay firm in the near term, headline inflation will pick up by more than core inflation this year."
Core inflation is projected to average 2.5 per cent to 3.5 per cent for the year as a whole, while overall inflation is forecast to come in between 4.5 per cent and 5.5 per cent.