Inflation in Singapore continued to decelerate in April. It slowed to 0.5% y/y from March’s figure of 1%. The slowdown was mainly because of low base linked with Service & Conservancy Charges rebates’ disbursement in April 2015. As these rebates were disbursed in May 2016, the base effects are expected to slow down inflation in May, said ANZ in a research report. In April, accommodation cost fell moderately by 0.9%, as compared with March’s decline of 3.2%. Meanwhile, private road transport cost declined 7.1%, more rapid than March’s fall of 5.9%, mainly because of major fall in car prices.
Singapore’s central bank’s core inflation measure, stripping accommodation and private road transport, accelerated 0.8% y/y in April from March’s 0.6% y/y because of higher inflation in services and smaller drop in electricity tariffs.
If the export and manufacturing data continue to post disappointing or deteriorating results, it will increase the risks on the downside to the country’s economic growth and will also raise the probability of the central bank easing policy given that inflation trajectory is benign, noted ANZ.
Any bounce in Singapore’s inflation is expected to be subdued as the headline inflation continues to be stuck in the negative territory in spite of Brent crude prices rising almost 25% and agricultural commodities prices increasing nearly 10% since the end of March. Singapore’s inflation is being weighed on by low productivity rather than weak demand, according to ANZ.
“We expect core inflation to remain sticky in the +0.5 to +1.0% range, notwithstanding persistent negative headline inflation prints”, added ANZ.
