Singapore: Core inflation kept the uptrend unchanged – UOB

Senior Economist at UOB Group Alvin Liew and Senior FX Strategist Peter Chia review the latest publication of inflation data in Singapore.

Key Takeaways

“Headline CPI rose by 0.4% m/m, 7.5% y/y in Sep (from 0.9% m/m, 7.5% y/y in Aug), fastest y/y print since Jun 2008, and in line with Bloomberg median estimate. Core inflation (which excludes accommodation and private road transport) continued to march higher as it rose by 0.5% m/m, 5.3% y/y (from 0.5% m/m, 5.1% y/y in Aug), the highest y/y print since Nov 2008 (5.53% y/y).”

“Singapore’s inflation has continued to trend higher, with the increase in core inflation and upward pressures on services inflation particularly concerning. Earlier in the Jul CPI report, the MAS removed its previous expectation for core inflation to peak in 3Q (2022) and in the Aug CPI report, it only retained the mention that “MAS Core Inflation is projected to stay elevated over the next few months.” In the latest Sep CPI report, the MAS now projects core inflation “to stay elevated in the next few quarters before slowing more discernibly in H2 2023…” This further affirms our view that it likely means that core inflation may stay elevated for longer.”

“Inflation Outlook – MAS narrowed the inflation forecasts, with projections for 2022 headline inflation at around 6% and core inflation at around 4%, while for 2023, after taking into account all factors including the GST increase, core inflation is expected at 3.5–4.5% on average over the year, and CPI-All Items inflation at 5.5–6.5%. Even after excluding the one-off effects of the GST increase early next year, core inflation would still remain above trend at 2.5–3.5% and headline inflation at 4.5–5.5%. While we keep our 2022 headline (6.0%) and core (4.2%) inflation forecasts unchanged, we now expect headline inflation to average 5.0% and core inflation average 4.0% in 2023. Excluding the 2023 GST impact, we expect headline inflation to average 4.0% and core inflation average 3.0% in 2023.”