Singapore's core inflation rises to 2% in July on higher electricity and gas, services, food prices

SINGAPORE: Singapore's core inflation rose to 2 per cent year-on-year in July, up from 1.6 per cent in June, according to official figures released on Monday (Aug 24).

This was because of higher inflation for electricity and gas, services and food, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) said in a joint media release.

The core inflation rate was lower than the median forecast of 2.2 per cent in a Reuters poll.

Core prices, which exclude accommodation and private transport, rose by 0.3 per cent month-on-month in July. 

Overall inflation, as measured by the Consumer Price Index-All Items, rose to 2.2 per cent in July from 1.9 per cent in June, due to higher accommodation inflation alongside higher core inflation. This was lower than the 2.3 per cent forecast in the Reuters poll.

On a month-on-month basis, overall inflation - which excludes non-consumption expenditures such as purchases of houses, shares and other financial assets and income taxes - fell by 0.2 per cent in July.

INFLATION BY SECTOR

Official data showed that electricity and gas inflation reversed a decline of 2.9 per cent in June to rise to 8.7 per cent in July, mainly reflecting a sharp rise in electricity prices, MAS and MTI said.

Services inflation rose to 1.7 per cent in July from 1.5 per cent the previous month as airfares and point-to-point transport services prices increased at a quicker pace.

Food inflation edged up from 2.1 per cent in June to 2.2 per cent in July as the prices of food services and non-cooked food increased at a faster pace as well.

Accommodation inflation picked up due to larger increases in housing rents and maintenance fees, rising to 0.8 per cent from 0.6 per cent in June.

Private transport inflation slowed as the pace of increase in petrol and diesel prices moderated, falling from 8.4 per cent in June to 8 per cent in July.

OUTLOOK

Elevated global energy prices have led to increases in Singapore's electricity and gas tariffs, as well as higher transportation fares, authorities noted.

The persistently high and volatile global oil prices, coupled with adverse weather conditions, are also expected to lower agricultural yields and raise Singapore's imported food prices.

"As higher input costs pass through global supply chains, the prices of a wider range of Singapore's imported goods and services are expected to pick up in the quarters ahead," said MAS and MTI.

Domestic unit labour costs in the services sector, meanwhile, are likely to rise at a slower pace amid sustained productivity growth and moderating nominal wage growth, the authorities said, adding that government subsidies will also continue to dampen services inflation.

Taking all factors into account, core inflation and overall inflation are projected to average 1.5 per cent to 2.5 per cent for the whole of 2026, in line with MAS' full-year forecast range.

Core inflation is expected to remain elevated into 2027, before moderating more discernibly from the middle of the year, alongside an expected easing in global energy prices.

"At this juncture, the risks to the inflation outlook remain tilted to the upside. Renewed disruptions in global energy supplies or worse-than-expected weather conditions could raise Singapore's imported costs by more than anticipated," MAS and MTI said.

"Inflation could also be more persistent than projected if robust IT investment growth generates stronger demand spillovers globally and in Singapore."

"However, downside risks remain," they said, adding that an unexpected tightening in global financial conditions or a pullback in artificial intelligence-related investment could lead to a slowdown in economic activity and, in turn, lower inflation.