With food and COE prices increasing, along with wage pressures, inflation appears to be “not only sticky but (is) becoming more broad-based, averaging at five percent”, according to DBS.
The bank expects September’s inflation rate to mirror that of August.
Despite the 2.1 percent unemployment rate in Q2, wage pressures worsened as the country tightened its policies towards foreign workers.
Furthermore, the flooding in Thailand and its government’s unveiling of a base price on rice will likely lead to higher prices on imported food in Singapore.
Rice in the region will see higher prices before levelling to three percent in 2012, as the global economic growth outlook weakens.
Economists and market observers are closely monitoring industrial production for September, as the figures offer a clearer view on whether the economy has averted a technical recession.
“The figures are based on the higher frequency data from July-August period and numbers for September are projected. The GDP growth figures are still subjected to revision,” said DBS.
“In our opinion, the revision to the final GDP figures will not be significant even if manufacturing comes in slower than expected as a possible upward revision in the services sector is likely to pick up part of the slack,” DBS added.
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