Meanwhile, MAS core inflation edged up to 1.2% y-o-y in September, from 1.1% y-o-y in August.
Headline inflation, or CPI-All items inflation, measures the total inflation in the economy, encompassing all the expenditure divisions, groups and classes.
MAS core inflation, on the other hand, measures price increments excluding the accommodation and private transport sectors.
The higher growth in headline inflation was predominantly due to higher inflation for food and accommodation. In September, accommodation prices rose 1.9% on a y-o-y basis, compared to the 1.7% growth in August.
See: Singapore's consumer price index grows across all household income groups in 1H2021
According to a joint statement by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI), the higher accommodation prices were driven by housing rents rising at a faster rate.
Meanwhile, food inflation edged up 1.6% y-o-y in September compared to 1.5% in August as the prices of non-cooked food and prepared meals increased at a slightly faster pace.
The higher CPI in September was also contributed by transport (8.3%), housing & utilities (2.3%), recreation & culture (1.5%), household durables & services (1.5%), education (1.2%) and healthcare (1.8%).
In contrast, clothing & footwear, communication, and miscellaneous goods & services registered decreases on a y-o-y basis of 5%, 2.2% and 0.3% respectively.
On a m-o-m basis, core CPI rose by 0.2% in September, while CPI‐All Items increased by 0.4%.
Moving forward, MAS and MTI state that global inflation has remained elevated and is likely to persist for some time, underpinned by higher crude oil prices as well as continued bottlenecks in global transportation.
In Singapore, the domestic labour market recovery should continue, with wages anticipated to rise at a steady pace as slack in the labour market dissipates. Consumer prices will also be supported by the recovery in domestic economic activity as the Covid situation stabilises.
MAS and MTI now expect MAS Core Inflation will come in near the upper end of their 0–1% forecast range, while CPI All Items inflation is forecast to come in around 2%.
MAS Core Inflation is expected to increase further to 1–2% in 2022, while CPI‐All Items inflation is forecast to average 1.5–2.5% next year. Amid construction delays, accommodation inflation should remain firm and continue to support CPI‐All Items inflation in 2022. Meanwhile, private transport inflation is likely to moderate next year on the back of a slower pace of increase in COE premiums and petrol costs.
Selena Ling, chief economist & head of treasury research & strategy, OCBC Bank, highlights that that core CPI has accelerated for the third straight month. "This is the highest core CPI reading since May 2019 (1.3% y-o-y), and underpins the gradual recovery theme in the Singapore economy.," she notes.
Ling is forecasting headline CPI to climb from 1.9% this year to 2% next year, while core CPI is also anticipated to more than double from 0.8% to 1.7% over the same period. "Notably, the contributing inflation drivers include construction delays which would imply firm accommodation rental costs, whereas private transport inflation is likely to ease somewhat as the increase in COE premiums and petrol costs slow in 2022.," she adds.
Ahead of the FY2022 Budget, Ling cautions that planned measures such as a hike in GST, the implementation of potential wealth taxes, as well as the hints of forthcoming price hikes for public transport, education and healthcare fees indicate more persistent cost pressures in the coming months. "If businesses continue to gain confidence to pass on their higher cumulative cost pressures to end-consumers, then it could also potentially spur a wage-price spiral although this is not our baseline scenario yet. Hence, the April 2022 monetary policy meeting remains a “live” one in our view for a potential further steepening of the S$NEER slope if inflation dynamics materialise as expected," she explains.
J.P. Morgan's Sin Beng Ong echoes Ling's sentiments. "Given the forecast path of core CPI over the next six to nine months, we expect that there could be a further steepening of the S$NEER slope during 2Q2022 especially if underlying pressures turn more persistent than we anticipate," he says.
Photo: Bloomberg
