Cheow Xin Yi, Today Online 24 Jan 08;
6.4% year-on-year rise was the chief contributor to overall inflation of 4.4%
IN November, it was the rising cost of food. Last month, it was the spike in transport fares. Each month now seems to bring its own reason why the inflation rate is reaching highs last witnessed some two decades ago.
Singapore's consumer price index (CPI) — a measure of the average change in the prices of a basket of goods and services — rose 4.4 per cent last month from a year earlier, with transport contributing the most.
Transport costs, which made up 22 per cent of the index, increased 6.4 per cent in December year-on-year, its highest in 15 years. Higher cab fares, car prices and dearer petrol contributed to the jump, said the Department of Statistics yesterday.
"A large part of the move upwards is on account of higher global oil prices, which has led in recent months to hikes in bus and taxi fares," said HSBC economist Robert Prior-Wandesforde.
ComfortDelGro, which runs the largest taxi fleet here with more than 17,000 cabs, jacked up fares by as much as 49 per cent on Dec 17, with other taxi firms following suit.
Bus fares had also increased in recent months, while the Government raised road tariffs for motorists.
The other main items responsible for the surge were food, which rose 5.5 per cent last month, and healthcare, the costs of which went up by 6.3 per cent.
For the full year, the CPI gained 2.1 per cent after rising 1 per cent in 2006. The Monetary Authority of Singapore (MAS) expects the index to increase between 3.5 and 4.5 per cent this year.
Rising inflation first made headlines when the October CPI figure surged unexpectedly to 3.6 per cent against a median forecast of 2.8 per cent. It hit 4.2 per cent a month later for a 25-year high.
While the numbers are in line with economists' expectations — merely 0.1 per cent above the 4.3-per-cent consensus forecast — most expect inflation to continue its upward trend this month. With higher valuations for HDB flats kicking in this year, some expect inflation to breach 6 per cent.
"We'll continue to see the impact of higher food prices as we go into the Chinese New Year, and possible food supply disruptions due to the weather, though there may be less pressure from fuel prices if the current moderation in crude oil prices continues," said CIMB-GK regional economist Song Seng Wun.
Despite the ongoing concerns, economists think it unlikely that the Government will further target the exchange rate to curb imported inflation after its surprise move to let the Singapore dollar appreciate faster in October.
Against the backdrop of a possible United States recession and intensified growth risks, Citigroup economist Kit Wei Zheng expects the "MAS to maintain its policy stance of a 'slightly steeper' appreciation bias" for the Singapore dollar.
Agreeing, DBS economist Irvin Seah said: "Given that external demand is already so weak, you wouldn't want to further aggravate the situation."
Instead, the Government is likely to alleviate inflationary pressures through concessions and rebates, said Mr Song.
