SINGAPORE’S March headline and core inflation both eased further than economists expected, data from the Department of Statistics showed on Tuesday (Apr 23).

Headline inflation slowed to 2.7 per cent year on year (yoy), lower than the 3.4 per cent recorded in February, and below the 3.1 per cent median forecast by private-sector economists polled by Bloomberg.

This was also the lowest headline inflation rate since September 2021, when it was 2.5 per cent.

The fall in headline inflation was due mainly to a decline in private transport costs as well as lower core inflation, said the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI).

Core inflation, which excludes accommodation and private transport, fell to 3.1 per cent. It eased from the 3.6 per cent recorded in February, and was also below economists’ median estimate of 3.5 per cent.

This was mainly driven by lower food and services inflation, MTI and MAS said.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

On a month-on-month basis, the overall consumer price index (CPI) fell by 0.1 per cent in March, while core CPI dropped by 0.2 per cent.

Private-sector economists had different views as to whether March’s softer-than-expected prints could persist in the coming months, and their effects on monetary policy measures.

MAS left its monetary policy settings unchanged in April, extending the pause for the fourth straight meeting.

“Don’t hold your breath that the bigger-than-expected drop in March inflation prints would usher in an imminent monetary policy easing by the MAS, whether at the July or October monetary policy statements,” said OCBC chief economist Selena Ling.

RHB acting group chief economist Barnabas Gan expects no changes to the MAS’ monetary policy parameters in July.

March’s lower-than-expected prints “may not persist” in the coming months, because of higher commodity prices in the second quarter, Gan said.

“Given Singapore’s trade-reliant economic structure, we already see evidence of higher food, energy and metal prices in the quarter, which may inject upside risks to Singapore’s imported inflation,” he added.

On the other hand, Maybank economists Chua Hak Bin and Brian Lee expect core inflation to “drift down gradually towards 2.5 per cent by the fourth quarter, opening the door for MAS to ease policy at the October meeting”.

A slope reduction of 50 basis points could occur as early as the July meeting, on the basis of a “continued transmission of imported disinflation into Singapore’s core CPI”, noted UOB economists Alvin Liew and Jester Koh.

MAS and MTI maintained their full-year inflation forecasts, with both headline and core inflation expected to average between 2.5 and 3.5 per cent. Excluding the transitory effects of the goods and services tax hike, both headline and core inflation are expected to come in at between 1.5 and 2.5 per cent.

Lower inflation was seen across all broad categories.

Costs of private transport fell by 0.3 per cent as car prices declined in tandem with lower Certificate of Entitlement (COE) premiums.

Private transport inflation is expected to be lower compared with last year, amid a larger projected COE supply, MAS and MTI said.

Accommodation inflation eased to 3.7 per cent, from 3.9 per cent before, due to a smaller increase in housing rents. 

Services inflation moderated to 3.9 per cent, from 4.2 per cent previously, as airfares fell and holiday expenses rose at a slower pace.

Despite a rise in tourist arrivals in March to a fresh post-pandemic high, there was no discernible Taylor Swift shock to prices, the Maybank economists noted. The global pop star performed six shows in early March to more than 300,000 attendees, many of them tourists, causing hotel prices to spike.

Inflation in services related to travel is expected to continue easing throughout the year, as supply conditions in global hospitality sectors improve, MAS and MTI said.

Food inflation eased to 3 per cent, from 3.8 per cent before, due mainly to a smaller increase in the prices of non-cooked food.

Electricity and gas inflation fell to 4.8 per cent from 5.2 per cent previously, as electricity costs rose at a more moderate pace.

Retail and other goods inflation declined to 0.7 per cent, with falls in the prices of clothing and footwear, and a more modest rate of increase in the prices of alcoholic drinks and tobacco.

In particular, clothing and footwear inflation fell 1.7 per cent yoy and 2 per cent sequentially.