SINGAPORE’S inflation rate came in higher than expected last month, up 6.7 per cent from September last year, to reach a three-month high.
Inflation, tracked through the consumer price index (CPI), was fuelled by the rising cost of food, housing and electricity.
However, economists expect the rate to ease in the months ahead.
In August, inflation rose 6.4 per cent year-on-year. Last month’s figure was 0.1 percentage point above the median figure of 6.6 per cent derived from a Bloomberg News poll of eight economists.
According to the Department of Statistics (DOS), housing costs shot up 14.6 per cent year-on-year because of higher accommodation costs and electricity tariffs.
Food prices were up 8.2 per cent year-on-year. The sharpest rises were in prices for poultry, seafood, cooking oil, fresh vegetables, rice and milk products.
Also, the CPI for the first nine months of this year was 6.9 per cent higher than in the same period last year.
‘Given the lingering elevation in the CPI in recent months, there is a chance inflation may not subside as quickly as initially thought towards the year-end,’ OCBC economist Selena Ling said.
She noted that although spot crude oil prices have fallen below US$70 a barrel, domestic energy costs - boosted by the 20 per cent rise in electricity tariffs this month - and food costs are likely to remain high, especially year-on-year.
In month-on-month terms, the rise in inflation has been far milder. Last month’s level matched that in August; after seasonal adjustments, the rate came in 0.1 percentage point higher.
According to the DOS, month-on-month, the rise in inflation was not as sharp because increases in food, housing and recreation prices had been offset by drops in the cost of education and stationery, transport and communication.
The cost of education and stationery fell by 2.3 per cent on a month-on-month basis as charges at childcare centres and tuition fees at overseas universities had dropped. Falls in petrol and car prices cut the cost of transport and communication by 0.5 per cent month-on-month.
These developments helped offset, for example, the month-on-month increases of 0.3 per cent in food prices and 0.4 per cent in housing costs. Despite rebates on service and conservancy charges, housing costs still rose last month because of the hike in accommodation costs.
UOB economist Ho Woei Chen said that, despite the electricity tariff hike, he expected year-on-year inflation to ease to around 6 per cent in the month, given the high base.
‘In the first nine months of the year, headline inflation was up 6.9 per cent, but the easing off in inflationary pressure should bring the average full-year inflation rate to around 6.5 per cent this year and 2.5 per cent next year,’ he said.
Ms Ling also expects to see some easing in the first half of next year. She noted this would come when ‘the recession story hits home and domestic consumers start trimming their spending, especially on discretionary items’ and ‘electricity tariffs adjust downwards, with a time lag, to reflect the sharp correction in the forward fuel prices’.
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