Singapore’s 2018 consumer price inflation likely to register 0.5 pct y/y, says OCBC Research

Singapore’s consumer price inflation (CPI) for the full year 2018 is likely to register 0.5 percent y/y and core inflation is seen at 1.5 percent y/y, according to the latest research report from OCBC Bank. Further, the April blip is likely to pass and both to accelerate modestly into the second half of this year.

The country’s headline and core inflation eased more than expected to 0.1 percent y/y (-0.5 percent m/m nsa) and 1.3 percent y/y respectively in April. This is a moderation from the March prints of 0.2 percent y/y (-0.2 percent m/m nsa) and 1.5 percent respectively, and below market consensus forecast of 0.4 percent y/y (-0.1 percent m/m nsa) and 1.5 percent y/y (-0.3 percent m/m nsa) and 1.3 percent y/y. This brought the headline inflation reading for January-April to 0.2 percent y/y, albeit the core inflation measures stood at 1.5 percent y/y for the same period of time.

The main drags were from housing & utilities (-2.3 percent y/y, mainly due to lower accommodation costs), communication (-1.3 percent y/y) and transport (-0.7 percent y/y, due to both public and private road transport fares).

The smaller increase in core inflation mainly reflected lower retail inflation and more modest increases in electricity tariffs in April. That said, MAS-MTI rhetoric remains that domestic sources of inflation are expected to increase alongside a faster pace of wage growth and a pickup in domestic demand.

"While consumer price hikes may remain moderate, amid subdued retail rents and constrained ability of firms to pass on higher costs to end-consumers, nevertheless, MAS core inflation is likely to rise gradually over the second half of this year," the report added.

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