SINGAPORE’S headline and core inflation both eased more than expected in January, even after the hike in the goods and service tax to 9 per cent, data from the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) showed on Friday (Feb 23).

Headline inflation for the month fell to 2.9 per cent, lower than the 3.7 per cent recorded in December as well as the 3.8 per cent median forecast by private-sector economists polled by Bloomberg.

It also grew at its slowest pace since the third quarter of 2021, noted DBS economist Chua Han Teng. MAS and MTI attributed the lower headline inflation to a fall in accommodation and private transport prices as well as softer core inflation.

Core inflation, which excludes accommodation and private transport, dipped to 3.1 per cent, easing from the 3.3 per cent recorded in December and below economists’ median estimate of 3.6 per cent.

This was driven by lower services and food inflation, notwithstanding the GST hike in January, said MAS and MTI.

The authorities kept to their full-year inflation forecasts, with both headline and core inflation expected to average between 2.5 and 3.5 per cent. Excluding the transitory effects of the GST hike, headline and core inflation is expected to come in at between 1.5 and 2.5 per cent.

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Core inflation is expected to nudge up higher in February due to the “Chinese New Year effect”, said Chua, with higher year-on-year price pressures on food in particular.

“Yet, contained imported inflation due to manageable global commodity prices and ongoing Singapore dollar strength, as well as easing domestic cost pass-through, should allow core inflation to average lower in 2024 versus 2023, after some volatility early in the year,” he added.

The softer-than-expected January print has prompted at least one economist to shave his 2024 full-year inflation forecast. Barclays economist Brian Tan now expects core inflation of 3 per cent this year, from 3.2 per cent, and headline inflation of 2.2 per cent, from 2.7 per cent.

Meanwhile, DBS and UOB kept to their forecasts for the full year. Chua maintained his 2024 average core inflation forecast of 3.1 per cent, while UOB economists Alvin Liew and Jester Koh still expect headline inflation to come in at 3.5 per cent and core inflation, 3 per cent.

Barclay’s Tan still expects that MAS will leave its monetary policy setting unchanged through 2025, with risks tilted towards further tightening in the form of a 50 basis points increase in the slope of the Singapore dollar nominal effective exchange rate policy band.

UOB’s Liew and Koh, on the other hand, believe that MAS will ease monetary policy settings through a slight slope reduction during the next meeting in April.

Key consumer price index categories

On a month-on-month basis, headline inflation fell by 0.7 per cent in January, while core inflation was up 0.6 per cent.

Lower inflation was recorded for most categories in January.

Accommodation inflation dropped to 2.1 per cent, from the previous month’s 4.1 per cent, due to the larger amount of service and conservancy charges rebate disbursed in January, as part of the Cost-of-Living Support Package announced last September.

Private transport inflation fell to 2.9 per cent, from 5 per cent previously, due to a slower rate of increase in car prices, which also reflected in lower Certificate of Entitlement premiums.

Services inflation nudged down slightly to 3.3 per cent, from 3.9 per cent the month before, on the back of a smaller increase in holiday expenses and a larger decline in airfares.

Food inflation moderated to 3.3 per cent, from 3.7 per cent previously, as the prices of cooked and non-cooked food rose at a more gradual pace.

In contrast, retail and other goods inflation nudged up to 1.4 per cent, from 1.1 per cent previously. This was due to an increase in the prices of clothing and footwear, as well as medicine and health products.

Electricity and gas inflation climbed to 5.3 per cent, from 1.3 per cent the month before, on account of larger increases in electricity and gas tariffs.