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25 Feb 08
Singapore’s annual inflation in January recorded highest growth since March 1982 and exceeded economists’ expectations, official data showed Monday.
The Department of Statistics announced that annual inflation stood at 6.6% in January, up from 4.4% in December. Annual inflation far exceeded the 5.6% expected by economists.
Among the various factors affecting the increase in consumer prices, housing costs jumped 11.1% year-on-year in January, while transportation and communication charges were up 6.9%. Food prices, on the other hand, grew 5.8% in January.
Based on the report of the statistical department, consumer prices rose 1.3% month-on-month in January, while on a seasonally adjusted basis, the monthly increase in the CPI was 1.5%.
On a monthly basis, food prices had a 1.1% increase, which was largely due to greater demand for food items, especially pork, ahead of the Lunar New Year period in early February.
Housing costs marked a 4.1% increase over the month in January. Education and stationery costs grew 2.5%.
The 3-month moving average inflation rose 0.8% month-on-month in January, the report added.
Singapore Jan CPI seen at new multi-year high as food, transport costs rise
25 Feb 08
Singapore’s consumer price index likely rose to another multi-year high in January as costs of food and transportation escalated, economists said.
The 2-percentage point hike in the goods and services tax, which took effect July 2007, may have also continued to lift consumer prices.
Four economists polled by Thomson Financial had forecast annual inflation in the city-state to come in at between 4.5-5.6 percent for January. In December inflation accelerated to a 25-year high of 4.4 percent.
Consumer prices probably rose between 0.3-0.8 percent in January from the previous month, according to the poll.
The Department of Statistics will release the CPI data at midday.
‘Little respite [is] expected on Singapore’s inflation front in the near term, especially ahead of the Chinese New Year festive season,’ said Selena Ling, economist at Oversea-Chinese Banking Corp.
The Lunar New Year fell on the first week of Februay.
‘We would have a lot of food price pressures coming from the region. China was hit,’ said Vishnu Varathan, economist at Forecast. ‘Food inflation in the region has been very persistent so that would be one prime source of inflation.’
China’s CPI rose 7.1 percent in January from a year earlier, the highest in more than 11 years, largely due to food supply disruptions caused by snowstorms in the mainland.
Singapore’s inflation last month may come in at 5.5 percent, on account of higher property tax payable that come with the revision of annual values of properties, said Alvin Liew, economist at Standard Chartered Bank.
The Singapore government recognized the strong inflationary pressures building in the economy, prompting it to raise its inflation forecast for this year to 4.5-5.5 percent from 3.5-4.5 percent. Inflation averaged 2.1 percent in 2007.
But the Monetary Authority of Singapore – the de facto central bank – has said its monetary policy of allowing a gradual and modest appreciation of the Singapore dollar’s nominal effective exchange rate remains appropriate.
The MAS reins in inflation by managing the movement of the Singapore dollar nominal effective exchange rate against a basket of trade-weighted currencies. A policy of modest to gradual appreciation of the Singapore dollar has long been maintained, with a slight tightening bias adopted in October last year when inflation started creeping up.
Forecast’s Varathan said while Singapore’s inflation will likely peak above 6 percent and could even top 7 percent in April, the MAS is unlikely to tighten its monetary policy given the strong downside risks to the economy if the US economy significantly slows this year.
‘While they may still play the Singapore dollar at the top end of the [trading] band to keep inflation in check, I do not see them raising the midpoint and I don’t see them steepening the band just yet. They probably would want to have a good measure of caution and not want to tighten,’ said Varathan.