Singapore’s core inflation rate reached 2.1% in October 2024, marking its lowest level in nearly three years, according to the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI). This drop, down from 2.8% in September, reflects easing price pressures across several sectors, including services, electricity and gas, and retail goods.
Key Highlights of October’s Inflation Data
- Core Inflation: Fell to 2.1% year-on-year, down from 2.8% in September. On a month-on-month basis, core inflation dropped by 0.3%.
- Headline Inflation: Eased to 1.4% year-on-year, compared to 2% in September. This was driven by slower accommodation inflation and a steeper decline in private transport costs.
- Sectoral Changes:
- Services Inflation: Dropped to 2.3% from 3.3%, primarily due to smaller increases in holiday and healthcare costs.
- Electricity and Gas: Inflation moderated significantly, falling to 2.5% from 6.3%.
- Retail and Other Goods: Declined to 0.1%, with notable decreases in clothing, footwear, and health product prices.
- Food Inflation: Remained stable at 2.6%, with consistent price increases in non-cooked food and food services.
- Accommodation Inflation: Edged down to 2.5% due to smaller rent hikes.
- Private Transport: Costs fell slightly faster, with inflation moving from -2.4% to -2.5%, driven by larger car price declines.
Easing Trends and Economic Insights
Singapore’s inflation slowdown aligns with global economic trends. MAS and MTI highlighted several factors contributing to the easing:
- Global Energy Prices: Despite recent volatility, energy prices remain lower than a year ago.
- Imported Goods: Declining prices for imported manufactured goods, supported by a stronger Singapore dollar.
- Labour Market: Gradually moderating unit labour costs and productivity improvements.
Future Inflation Outlook
The easing of inflation is expected to continue:
- Core Inflation: Projected to stay around 2% through the end of 2024, averaging 2.5% to 3% for the year before stepping down further to 1.5% to 2.5% in 2025.
- Overall Inflation: Anticipated to average 2.5% in 2024 and settle between 1.5% to 2.5% in 2025.
- Accommodation Costs: Predicted to decrease in 2025, helping offset an anticipated uptick in private transport costs amid firm demand for cars.
Risks to Inflation
While the inflation outlook is relatively balanced, several factors could shift the trajectory:
- Geopolitical Tensions: Escalating conflicts could drive up commodity prices, leading to higher imported costs.
- Labour Market Strength: Stronger-than-expected conditions might slow the easing of unit labour costs.
- Global Economic Trends: A significant global downturn could accelerate the decline in domestic price pressures.
Expert Perspectives
Selena Ling, OCBC’s Chief Economist, emphasized potential external risks:
- US Economic Policy: A “second inflation bout” in the US, driven by tariff increases and other policies under Donald Trump’s administration, could limit the flexibility of global central banks, including the US Federal Reserve, to cut interest rates.
- Singapore Budget 2025: She anticipates a “bigger fiscal impulse” to address cost-of-living concerns and job security, given the potential for this Budget to be the last of the current government term.
Why This Matters to Singaporeans
The declining inflation rate offers some relief for households and businesses grappling with high costs. It indicates:
- Stabilizing Prices: Essential goods and services, including utilities and healthcare, are becoming more affordable.
- Improved Purchasing Power: As inflation cools, Singaporeans may experience a slower pace of price increases, easing the cost-of-living burden.
However, MAS and MTI caution that uncertainties remain, urging businesses and individuals to remain vigilant about potential global disruptions.
