S'pore inflation inches up to 1.6% y-o-y in May as car prices fall

Inflation in Singapore picked up marginally to 1.6 per cent in May after sinking to a three-year low in April, when the consumer price index rose 1.5 per cent year-on-year.

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Here is the press release from the Monetary Authority of Singapore:

CPI-All Items inflation rose slightly to 1.6 per cent in May from 1.5 per cent in April. While car prices declined, it was more than offset by higher contributions from all other major categories.

Services inflation picked up to 2.5 per cent in May from 2.2 per cent in April, on account of costlier medical treatment and medical insurance as well as a smaller fall in holiday travel cost.

Food prices were up by 2.0 per cent in May, slightly stronger than the 1.8 per cent rise in the preceding month, reflecting steeper price increases for both non-cooked food and prepared meals.

Prices of oil-related items fell by a more modest 4.4 per cent in May compared with the 5.2 per cent decline in April, led by a smaller reduction in petrol pump prices.

Accommodation costs climbed by 5.1 per cent in May, up from 2.4 per cent in April, as the impact of the disbursement of HDB Service & Conservancy Charges (S&CC) rebates in April dissipated. Imputed rentals on owner-occupied accommodation continued to increase, contributing 0.9 per cent point to overall inflation in May.

Private road transport cost fell by 3.7 per cent in May, the first decline since 2009, reversing the 0.5 per cent rise in April. The fall was due to lower COE premiums in April and price adjustments by car dealers following the implementation of the motor vehicle-related policy measures.

CPI less imputed rentals on owner-occupied accommodation (CPI-ex OOA) rose at a slightly faster pace of 0.8 per cent.

Inflation as measured by CPI less imputed rentals on OOA (CPI-ex OOA) edged up to 0.8 per cent in May from 0.6 per cent a month earlier, given the dissipation of the impact of S&CC rebates and higher contributions from costs of services, food and oil-related items.

The lower CPI-ex OOA inflation, compared to the CPI-All Items series, reflects the strong increase in imputed rentals on owner-occupied accommodation, which does not impact the actual cash expenditures of households who own their homes.

MAS Core Inflation was higher at 1.7 per cent in May

MAS Core Inflation, which excludes the costs of accommodation and private road transport, rose to 1.7 per cent in May from 1.4 per cent in April, mainly due to steeper increases in services fees and food prices.

Outlook

Imported inflation will likely remain subdued this year, given ample supply buffers in the commodity markets. However, domestic cost pressures are expected to persist amid continuing tightness in the labour market, and cost pass-through to prices of consumer services could pick up slightly.

Taking these factors into account, MAS Core Inflation is expected to rise moderately in the second half of the year and average 1.5-2.5 per cent in 2013.

Imputed rentals on owner-occupied accommodation will continue to add significantly to CPI-All Items inflation this year, although the pace of increase will likely be slower in the second half as more private housing units come on-stream.

While COE premiums could fluctuate as the market continues to adjust to the motor vehicle-related policy measures, its contribution to CPI-All items inflation is likely to be lower compared to last year.

For 2013, CPI-All Items inflation is expected to be 3-4 per cent.