Inflation in 2015 lowest in almost 3 decades

Singapore's consumer prices fell the most in almost three decades last year amid very low oil prices, lacklustre economic growth and the soft housing rental market.

Still, most economists do not expect the central bank to deploy monetary policy to combat this long funk in growth and inflation.

They expect the Monetary Authority of Singapore (MAS) to maintain its Singapore dollar policy instead of acting to slow the currency's appreciation - barring a major shock or signs of recession.

Data out yesterday showed December's consumer price index - which measures inflation - slid 0.6 per cent over December 2014.

This was its 14th straight month of contraction and Singapore's longest stretch of negative inflation since the global financial crisis.

It brought inflation for all of last year to negative 0.5 per cent - the first full-year negative inflation reading here since 2002, and the lowest in 29 years, noted DBS economist Irvin Seah.

Falling private road transport and housing costs were the main drags on inflation last month. But their impact on household daily expenses was limited.

The MAS core inflation measure, excluding these two items to better gauge everyday expenses, rose to 0.3 per cent last month from 0.2 per cent in November.

For the whole of 2015, core inflation came in at 0.5 per cent.

Households in the lowest 20 per cent income group experienced the largest fall last year.

How Singaporeans can lower their cost of living

  • Nobody ever said Singapore was a cheap place to live in. But some things here are more expensive than others, and getting a cheap meal isn't impossible so long as you don't expect to be sitting in air conditioned comfort and waited on hand and foot.
  • Renting out unused rooms on your property to defray the cost of living can generate some passive income for yourself.
  • If you live in private property, rent out your place on a short-term basis on Airbnb whenever you go on holiday, so you earn some spare cash while you travel.
  • Go to polyclinics for basic medical and dental help (unless you employer pays for this). The $10.70 you pay for a consultation at a polyclinic is 1/3 the price you'd pay at a private clinic. The medicines also tend to be cheaper.
  • Use your $500 SkillsFuture and your $100 ActiveSG credit.
  • If you have kids of school-going age, check if they qualify for Edusave Bursaries and Awards and the Good Progress Award. The household income cap for the Edusave Merit Bursary is $6,000 as of 2015.
  • Anybody planning to buy HDB property needs to understand the different CPF Housing Grants.
  • Meals at mid-range to high-end restaurants have escalated in price over the past decades. While $10 could get you a decent restaurant meal in the 90s, these days you'll need to budget about $25 to $30.
  • On the other hand, while hawker food prices have not risen as quickly, and picking hawker centres instead of restaurants when you eat out means greater savings than before.
  • Public transport is way cheaper than driving, even if you rely mostly on taxis.
  • Alcohol is ridiculously expensive, but drinking in the streets is actually allowed before 10:30pm. Buying a beer from 7-11 instead of imbibing it at an overpriced Clarke Quay bar will save you almost $20.

This group experienced a negative 1.1 per cent inflation rate, compared with 0.3 per cent for the middle 60 per cent and 0.7 per cent for the top 20 per cent.

This was driven by lower accommodation costs and electricity tariffs for all income groups.

The lowest 20 per cent also benefited relatively more from cheaper healthcare, while lower car prices aided households in the top 20 per cent.

Official estimates tip overall inflation of between negative 0.5 and 0.5 per cent this year. Core inflation is forecast at 0.5 to 1.5 per cent.

Economists say the outlook for inflation and growth remains muted but they look set to fall within MAS forecasts, so MAS is expected to keep its exchange rate policy unchanged at its next meeting in April.

The MAS uses the exchange rate as its main tool to strike a balance between inflation from overseas and economic growth.

A stronger currency helps counter inflation by making imports cheaper in Singdollar terms, while a weaker Singdollar helps boost growth by making exports cheaper in foreign markets.

Officials yesterday cited "significant uncertainty" over the outlook for global oil prices this year. In a joint statement, MAS and the Trade and Industry Ministry said they "will continue to closely monitor the developments in global oil prices and assess their impact on domestic inflation".

This article was first published on Jan 26, 2016.
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