Channel NewsAsia 25 Feb 08;
SINGAPORE - Singapore's annual inflation rate hit a 25-year high of 6.6 percent in January, according to Department of Statistics (DOS) data released on Monday.
The inflation rate, as indicated by the consumer price index (CPI), was the highest since the 7.5 percent hit in March 1982.
From a month earlier, consumer prices in January rose 1.5 percent on a seasonally adjusted basis, the DOS said.
The Ministry of Trade and Industry (MTI) issued a statement along with the DOS data,
saying the year-on-year jump in inflation in January was due to one-off factors such as a housing value revision and that it was in line with the official inflation forecast of 4.5-5.5 percent for 2008.
The MTI said inflation would start to ease in the second half of the year. In December, the annual rate was 4.4 percent.
"The 6.6 percent year-on-year increase in the CPI in January 2008 was consistent with the official inflation forecast of 4.5 to 5.5 percent for 2008 as a whole," the MTI said in a statement.
The DOS said the jump in inflation was due largely to an 11.1 percent spike in housing costs recorded after a revision to values of public housing.
Housing costs, which account for 21 percent of the consumer price index, have the third-largest weighting after food and transport/communication.
Food prices, which carry the largest weighting in the CPI, rose 5.8 percent in January from a year earlier.
Transport and communication costs rose 6.9 percent between January 2007 and January 2008, driven by soaring global fuel prices and higher taxi fares.
Higher petrol prices also contributed to a rise in transport costs for food. This, coupled with higher global food prices, means more expensive grocery bills.
But one Singapore supermarket chain has extended a discount scheme to help shoppers cope with rising costs.
NTUC FairPrice has given customers 5 per cent off 500 of its housebrand products since mid-December 2007.
The discounts, originally due to finish at the end of February, has now been extended until the end of April.
The extension is costing FairPrice $1 million and is part of the company's "Stretch Your Dollar" programme.
In the heart of Singapore's financial district, many were not surprised to hear the latest inflation figure. Many have already tightened their belts.
"I have a family, so I have to plan our expenses and cut out unnecessary spending and then maybe make some investment to cover the shortfall," said a member of the public.
"Shop around a bit more, do a bit of homework (before buying anything). It's a bit tedious but at the end of the day it's your pocket," said another. - CNA/ac/ir
What's behind that balloon?
One-off factors led to 6.6% inflation figure; may moderate by mid-'08: MTI
Christie Loh, Today Online 26 Feb 08;
EVEN as parliamentarians queried the Government yesterday on inflation controls, the GST hike and more help for Singaporeans to cope with the rising cost of living, fresh data showed that inflation has remained sticky at a 26-year high.
In January, overall consumer prices jumped by 6.6 per cent compared to the same month a year ago, fuelled by costlier transport, healthcare, food and clothing.
This marks the third straight month that inflation is at levels not seen since 1982, a time when Singapore was similarly enjoying an economic boom.
It might also appear that inflation is picking up because the increases for November and December were slower at 4.2 per cent and 4.4 per cent respectively.
However, several one-off factors are behind the latest high, said the Ministry of Trade and Industry (MTI) yesterday in a rare statement — it does not normally respond to monthly inflation figures released by the Department of Statistics.
MTI listed two reasons. First, it said, the jump has much to do with the upward revision in the Annual Value of housing flats, which took effect in January. The taxman revises the Annual Value, which is the estimated rental income if a property were to be leased out, to reflect buoyant market conditions.
While this pushed up the consumer price index — as housing makes up one-fifth of the basket of goods and services measured — "this does not actually affect the expenditures of most Singaporeans, who own the homes they live in".
The second factor is similarly technical. The inflation figure for last January is much lower than that of January 2008 due to the timing of rebates for service and conservancy charges. Last year, such rebates were given out in January but this time around they were distributed earlier, in December.
"As the effects of the low base and one-off factors wear off in the second half of 2008, year-on-year inflation is expected to moderate significantly," said MTI, which expects full-year inflation to be between 4.5 and 5.5 per cent.
But meanwhile, the layman feels the pain and needs relief, going by calls from MPs during the Budget debate. Their suggestions included reversing last July's 2-percentage-point hike in Goods and Services Tax — which contributed to inflation — back to 5 per cent.
MP Zainudin Nordin, who is Mayor of the Central District, said if inflation this year does hit the forecast figure of about 4.5 per cent, that would wipe out the wage increases of low-income Singaporeans, who saw a below-4-per-cent growth in salaries last year.
"It is simple primary school math," said Mr Zainudin.
The MTI – which has recently been releasing more data related to the inflationary environment, such as a table showing how food prices here have not risen as much as in Malaysia, America or Hong Kong – yesterday recommended that three types of inflation figures be studied together "to better understand the underlying trend". These are data comparing changes a year ago, month to month, and a three-month moving average that smoothens out volatility to indicate inflation momentum.
It is in examining the three-month moving average of 0.8 per cent in January that MTI concludes: "Inflation momentum has neither accelerated nor abated in January 2008".
The professional number crunchers, meanwhile, see inflation staying high in the coming months.
Citi economist Kit Wei Zheng expects inflation to "hover above the 6-per-cent mark throughout the first half of 2008", before moderating to around 4 per cent in the second half. For the full year, Mr Kit foresees a figure of 5 per cent "but with risks on the upside".
Fears of worsening inflation are burgeoning worldwide, partly because oil prices are trading near US$100 per barrel after skyrocketing to a record US$101 last week.
At the same time, China's stubbornly high inflation has started to trigger concerns that the world's cheap factory will soon 'export' inflation to the rest of the world.
Singapore's central bank has been trying to relieve imported price pressures by allowing the currency to appreciate against the US dollar.
But there are also local factors contributing to inflation, such as the impending increase in Electronic Road Pricing charges and higher school fees, said United Overseas Bank economist Ho Woei Chen.
Singapore January inflation rate rises to hit 6.6%
But economists don't expect further monetary tightening in April
Anna Teo, Business Times 26 Feb 08;
(SINGAPORE) The inflation rate surged to another 25-year high of 6.6 per cent in January - and is not expected to ease for a while yet.
Still, most economists do not expect further monetary tightening in April, citing growing concern on the government's part about the impact of an overly-strong Singapore dollar on exports. Instead, the Monetary Authority of Singapore (MAS) is expected to maintain a 'modest and gradual appreciation' of the trade-weighted nominal exchange rate at its next policy review.
Higher costs of not only food but also housing and transport weighed on the consumer price index (CPI) last month, according to figures released yesterday.
The latest data prompted the Ministry of Trade and Industry (MTI) to issue a statement saying that the 6.6 per cent jump in the CPI - up from December's 4.4 per cent, which was also a 25-year high then - is 'consistent' with the official inflation forecast of 4.5 to 5.5 per cent for 2008 as a whole.
The January high not only comes off revised annual values of HDB flats, it also reflects a low base 12 months earlier in January 2007 when the inflation rate was only 0.3 per cent.
According to MTI, the month-on-month CPI numbers - particularly when smoothed out to remove the monthly volatility - give a better picture of the underlying trend.
And the three-month moving average of the month-on-month inflation rates has hovered around 0.8 per cent since picking up sharply last July when the Goods and Services Tax (GST) rate was raised by two percentage points.
January's 0.8 per cent pace by this measure largely reflects the global inflation in food and energy prices that has persisted through the past seven months, MTI says.
Maintaining that there has been no surge in the core rate of inflation since last July, MTI says: 'Inflation momentum has neither accelerated nor abated in January 2008.'
The year-on-year inflation rate should 'moderate significantly' in the second half of 2008 as the effects of the low base and one-off factors wear off, but underlying inflation will likely ease more gradually, pending external price trends, it says.
But economists track the standard year-on-year CPI measure, and most see inflation staying high in the near term.
DBS Bank economist Irvin Seah reckons that even with the GST effect out of the picture from the second half onwards, fundamental price pressures will remain.
Apart from high food and oil prices, domestic price pressures will be kept high by short-term job market tightness and with rising rents, Mr Seah writes in a recent report.
He forecasts: 'Inflation now looks set to average 5 per cent in 2008, with core inflation lifted to 3.7 per cent.'
Despite the uptick, Mr Seah and other economists - taking a cue from Finance Minister Tharman Shanmugaratnam's remarks about Singapore's inflation strategy in his recent Budget statement - do not think that MAS will further increase the Sing dollar appreciation slope at the next review.
One exception is Goldman Sachs economist Mark Tan. He thinks that the recent fiscal easing and falling interest rates will provide a buffer to economic growth and has given MAS room to further tighten its policy stance.
6.6% - Housing, transport, food prices fuel Jan inflation
Bryan Lee, Straits Times 26 Feb 08;
INFLATION accelerated last month to a 26-year high of 6.6 per cent with housing, food and transport costs registering steep increases over the past year.
The January figure picks up pace from December's 4.4 per cent jump - itself the biggest rise since April 1982 - as external and local factors added further upward momentum to consumer prices.
The big surge was largely anticipated by economists, who said inflation rates in the coming months are unlikely to rise much more from the current levels.
Still, the spike seems to have prompted an unprecedented move by the Ministry of Trade and Industry (MTI), which issued a statement on the inflation data as it was published yesterday by the Department of Statistics.
Seemingly looking to quell fears of spiralling living costs, the MTI said that while the jump in consumer prices last month was high, this was consistent with the official full-year inflation forecast of 4.5 to 5.5 per cent.
It said the spike was bumped up by several one-off factors, adding that price pressures should subside later in the year.
The surge in last month's consumer price index (CPI) was driven largely by an 11.1 per cent jump in housing costs.
Much of this came from the Government's one-off revision of the annual values of public flats. The annual value is the theoretical rental income that a house could fetch in a year.
'As has been explained in Parliament, this does not actually affect expenditures of most Singaporeans, who own the homes they live in,' said the MTI statement.
The ministry also pointed out that price levels were especially low in January last year, due in part to service and conservancy rebates given out that month. Such rebates were not given last month as they were already doled out in December.
Less theoretical were the hikes in food and transport costs, the two biggest components of the CPI.
Driven by global prices, costs of raw food such as dairy products, cooking oil and meat surged, which in turn made dining out more expensive, said the Department of Statistics in its monthly statement.
High oil prices made driving more costly, while car prices and taxi fares rose, it added.
Some of the increase would have been the result of last July's goods and services tax hike, which continues to inflate year-on-year CPI figures even though it is no longer raising price levels from one month to the next.
The MTI said looking at price rises between consecutive months would indicate inflation momentum better. Taking three-month averages to smooth out monthly volatility, it said inflation momentum picked up last July but has stayed constant since then.
Still, if headline inflation figures, which use year- on-year comparisons, remain high, inflation expectations may rise, warned Citigroup economist Kit Wei Zheng. This may prompt workers to demand higher wages to compensate for rising living costs.
Experts also said the CPI probably underestimates the pace at which living costs for foreign workers are rising, and hence the rate at which Singapore's edge in the global competition for international talent is being eroded.
CIMB-GK economist Song Seng Wun noted that expatriates are likely to face much higher hikes in private home rentals and international school fees than what the CPI indicates.
