Singapore core inflation slows

> November numbers dragged down by lower services costs

SINGAPORE: Singapore’s core inflation unexpectedly slowed in November, dragged down by lower services costs, but is expected to head higher next year as the impact from one-off government health subsidies dissipates.

The Monetary Authority of Singapore’s (MAS) core inflation gauge, which excludes volatile goods and service prices but includes energy costs, rose 0.2% in November from a year earlier, down from a 0.3% increase in October.

The median market forecast in a Reuters survey was for a rise of 0.4%.

The MAS’s core inflation gauge is the focus of monetary policy and excludes private road transport and accommodation costs, which are influenced largely by local administrative policies.

The city-state’s core inflation has slowed this year and set a fiveyear low of 0.1% in May, due to the impact of lower oil prices, as well as healthcare subsidies and other government measures that have helped temper services costs.

“Generally we expect inflation to come higher, but just very slightly,” said Standard Chartered Bank Southeast Asia regional head of research Edward Lee, referring to the outlook for next year.

Core inflation is likely to rise to 1.3% for the whole of 2016, while allitems inflation will probably rise to 0.6%, Lee said.

“I don’t think MAS will do anything in April,” he said, referring to the central bank’s next scheduled policy announcement.

The drop in core inflation was largely due to lower food and services inflation, the MAS and the Ministry of Trade and Industry said in their monthly statement on consumer prices.

Services inflation slowed to 0.7% year-on-year in November from 0.8% in October, as healthcare costs fell after the introduction of government subsidies, they said.

The MAS kept its inflation forecasts for 2015 and 2016 unchanged.

It expects core inflation to be between 0.5 and 1.5% for the whole of 2016, and to be around 0.5% in 2015.

It also expects the headline consumer price index to fall on average by around 0.5% in 2015 year-on-year. The MAS forecast range for headline inflation in 2016 is from a 0.5% decline to a 0.5% rise.

The all-items consumer price index fell 0.8% in November from a year earlier, official data showed.

The median forecast in a Reuters survey was for headline CPI to fall 0.7% year-on-year. In October, headline CPI fell 0.8% from a year earlier.

Singapore’s headline CPI has been falling on a year-on-year basis since November 2014, dragged down by a slide in global oil prices as well as falls in housing rents and private road transport costs.

A slowdown in China’s economy has dampened growth across export-reliant economies in the region including Singapore, where the economy is seen heading toward its slowest full-year growth in six years.

Against a backdrop of low inflation and tepid global growth, Singapore’s central bank has eased monetary policy twice this year, most recently in October. – Reuters