Singapore’s consumer price inflation accelerated to 0.8 percent year-on-year in December from November’s 0.6 percent, coming above market expectations of 0.7 percent. For the whole of 2019, the consumer price inflation accelerated a bit to 0.6 percent year-on-year from 2018’ print of 0.4 percent. This marks the fifth straight month that headline CPI has failed to record inflationary pressures of over 1 percent year-on-year. Decelerating gains in raw food prices, relatively subdued healthcare costs and negative contributions from imputed rentals are main reasons for this structural change that has been seen in the last half-decade.
Meanwhile, core inflation accelerated to 0.7 percent year-on-year in December from November’s year-on-year print of 0.6 percent. For the whole of 2019, core inflation came in at 1 percent, the lower end of MAS’ comfort range of 1 to 2 percent and the slowest since 2016. Deflationary pressures from the utilities basket because of the Open Electricity Market and relatively benign gains in the healthcare and raw food baskets added to the weak showing in core inflation this year.
“As we enter the New Year, we expect deflationary pressures from imputed rentals to continue normalising towards neutral territory. We expect headline inflation in 2020 to inch higher to 1.1 percent yoy, consistent with MAS’ estimate range of 0.5 percent to 1.5 percent yoy. We also expect core inflation in 2020 at 1.1 percent yoy. Risks to our 2020 inflation estimates, however, remain tilted to the downside”, stated Howie Lee, Economist, OCBC Bank.
