S'pore ends streak of negative inflation after 24 months

S'pore ends streak of negative inflation after 24 months
PHOTO: The Straits Times

Singapore's longest spell of negative inflation finally came to an end last month on the back of gradually recovering commodity prices and brighter prospects for global growth next year.

After 24 straight months of sliding readings, the consumer price index - the main measure of inflation - was flat last month compared with the same month a year ago.

Lower oil and car prices and falling accommodation costs have been the main drivers behind this long bout of negative inflation.

However, prices of necessities have continued to inch upwards over this period. That is why the central bank does not regard this run of falling prices as "deflation", which indicates a chronic lack of demand across an economy.

Last month's zero per cent inflation rate was an important milestone, said UOB economist Francis Tan.

"It shows that we may start to experience some inflation in 2017. Some inflation is good as it could signal stronger demand," he added.

Yesterday's inflation data came alongside figures from the Economic Development Board showing that manufacturing output jumped 11.9 per cent last month over the same month last year - the fastest pace since March 2014. This means full-year economic growth could come in stronger than previously expected.

'STRONGER'

"Although it may still be too early to make a conclusion, stronger economic activities for an open economy such as Singapore point to some uplift in global demand," said Mr Tan, who added that this would be accompanied by a lift in inflation.

Rising commodity prices helped end Singapore's longest spate of negative inflation.

After crashing to about US$30 ($43) per barrel earlier this year, crude oil prices have since rallied past US$50 per barrel and are on track to rise further.

This means households should expect an uptick in utility costs in the coming year, added CIMB Private Bank economist Song Seng Wun.

Last month's non-negative inflation reading also reflected a pick-up in services and food inflation, the Monetary Authority of Singapore and the Trade and Industry Ministry said yesterday.

Food inflation edged up to 2 per cent from 1.9 per cent in October, due to a larger increase in the prices of non-cooked items such as vegetables and fruits.

Overall services inflation also ticked up last month to 1.5 per cent compared with a year ago.

Government forecasters expect core inflation to average around 1 per cent in 2016 before rising to 1 per cent to 2 per cent next year.

The increase will be gradual because of subdued economic growth and the soft labour market.

chiaym@sph.com.sg


This article was first published on December 24, 2016.
Get The New Paper for more stories.

Purchase this article for republication.

BRANDINSIDER

SPONSORED

Most Read

Your daily good stuff - AsiaOne stories delivered straight to your inbox
By signing up, you agree to our Privacy policy and Terms and Conditions.