Singaporean disinflationary streak continued in July with the headline and core data both falling 0.4 percent on a year-on-year basis, as compared with the fall of 0.5 percent and 0.2 percent drop seen in June. This also marked the 4th and 6th consecutive month of negative readings amidst the domestic recession and soft consumer spending in the midst of the ongoing Covid-19 pandemic. The drag on consumer prices was linked to a steeper fall in electricity & gas prices, cheaper private transport costs, as well as lower food inflation.
Markedly, the fall in services costs had eased as imputed holiday expenses and airfares saw smaller falls, whereas telecommunication services costs rose more rapidly. This was also seen in the hike in telecommunication equipment prices. In all, the mild disinflationary prints are reflective of the modest pickup in economic consumption with the gradual re-opening of the Singapore economy, albeit private consumption has not reverted to pre-Covid levels. On a month-on-month basis, headline and core inflation fell 0.3 percent and 0.2 percent, respectively, after being flat in June.
The inflation outlook continues to be tepid in the near-term, with external pricing pressures likely to stay benign in the midst of global recessionary conditions. Crude oil prices in particular should continue to be weak for longer, while imported food prices might stay elevated in the midst of the global supply chain disruptions, said Selena Ling, Head of Treasury Research and Strategy, OCBC Bank.
“We tip headline and core CPI to remain in negative territory till year-end. Our full-year 2020 headline and core inflation forecasts are -0.4 percent yoy and -0.3 percent yoy respectively, but both are likely to rebound to 1.2 percent yoy in 2021 as the global and domestic demand normalises. Hence, we do not expect deflationary pressures to persist into 2021 as the prospect of a Covid-19 vaccine nears and assuming that the unprecedented fiscal and monetary policy stimulus bears fruit to restart the global economic engine. For the year-to-date, headline and core CPI are running at -0.2 percent yoy and -0.1 percent yoy respectively, which is at the lower end of the official headline and core CPI forecasts of -1 percent to 0 percent yoy”, added Selena Ling.
