SINGAPORE: Singapore’s February consumer price index (CPI) rose by five per cent, versus market expectations for a rise of 5.4 per cent.
This was due to slower rise in costs of transport, housing and food, according to the Department of Statistics (DOS).
The number was also lower than January’s 5.5 per cent on-year rise.
Compared with February 2010, the cost of transport advanced by 15.2 per cent, as a result of higher prices for cars and petrol.
Housing costs increased by 5.8 per cent, arising from higher accommodation and electricity tariffs.
Food prices rose 2.6 per cent.
Excluding accommodation costs, CPI rose 4.5 per cent on year.
DOS said on a month-on-month basis, CPI fell marginally by 0.1 per cent, as a result of the lower cost of transport compared to last month, which more than offset higher housing, food, and recreational costs.
Transport costs fell 2.3 per cent, mainly attributed to lower car prices.
“It reflects the reduction in COE prices in the month of February. COE prices were at their high in December, at $75,000 in open category, that receded to about $62,000 in February. So correspondingly we see it as a reduction in the drag from transport inflation,” said Mr Leong Wai Ho, senior regional economist for Barclays Capital.
In contrast, housing costs rose 0.5 per cent.
More expensive prepared meals drove food prices up by 0.4 per cent.
Higher foreign maid salaries and more expensive holiday travel led to a 0.6 per cent increase in the “recreation & others” category.
Excluding accommodation, CPI fell 0.3 per cent on month.
Core inflation measure, which excludes the costs of accommodation and private road transport and is tracked by the Monetary Authority of Singapore, rose 1.8 per cent on year, versus 2.0 per cent in January.
However, other pressures could be emerging that could push prices higher.
Economists point to food, which accounts for 22 per cent of the CPI basket. Food prices have been steadily rising over the last 12 months.
Energy prices, which also accounts for around 20 per cent of the index, are also expected to remain elevated in the near-term because of the crisis in the Middle East.
Analysts say this could contribute to higher transportation costs here.
Analysts have said crude oil prices could rise to US$120 a barrel if tensions in the Middle East don’t get resolved soon.
“This has strong implications for monetary policy, because we have to recognise that back in October, during the last policy review, the MAS expected inflation to hover around 4%, but it has now exceeded even the 5% mark and it is likely to stay above the 5% level for the next couple of months,” said Mr Irvin Seah, economist for DBS Group Research.
Analysts say this means the Sing dollar could go as high as 1.20 against the US dollar by the end of this year, as the authorities look to tame imported inflation and prevent higher costs from feeding into a wage-inflation spiral.
Comment: Can you identify the “demand-pull” and “cost-push” factors that are driving up the inflation rate?