Singapore’s inflation dipped to 1.2 percent in July from 1.8 percent in the previous month on a year-on-year (y-o-y) basis. Core inflation climbed to 2.2 percent from 2.1 percent in June, lower than Barclays’ forecast of 2.3 percent.
“The main cause of the decline in headline inflation was further pass-through from prior falls in COE prices on a higher base, but an additional factor was a surprise fall in the housing category – driven by weakness in rents and imputed rents,” said the financial institution in a report yesterday.
“Indeed, alongside property prices, residential rents have now fallen for three consecutive quarters, by a cumulative 1.1 percent since the previous peak in Q3 2013.”
Moving forward, the transportation sector is expected to have a softer effect on Singapore’s inflation in the coming months due to the recent stabilisation in COE prices, but the continuing weakness in the residential market will likely mitigate this.
Inflation in the housing category fell to new post-2010 low of -0.1 percent. Inflation in this segment also recorded its eighth month drop, considering that housing rents slid by 0.2 percent quarter-on-quarter in Q2 2014, its third quarterly fall.
“Despite the volatility from COE prices, core inflation remains well contained, in our view. We continue to expect the ongoing weakness in demand-side pressures stemming from the cooling property market and weaker tourism inflows to help offset the impact of elevated unit labour costs and higher food prices on the back of higher distribution costs from Malaysia (fuel and toll price hikes),” added Barclays.
Muneerah Bee, Senior Journalist at PropertyGuru, edited this story. To contact her about this or other stories email muneerah@propertyguru.com.sg