Singapore’s core inflation falls to 0.6% in February

Key Concepts:

• Core Inflation: Inflation excluding accommodation and private transport costs.
• Headline Inflation: Overall inflation rate including all items, such as accommodation and private transport.
• Pent-up Demand: Accumulated demand released after a period of constraint, specifically in travel.
• Services Inflation: Inflation within the services sector.
• Supply Chain Pressures: Disruptions or constraints in the flow of goods and services.
• Tariffs: Taxes imposed on imported goods.
• Monetary Authority of Singapore (MAS): Singapore's central bank.
• Trade Industry Ministry (MTI): Government ministry responsible for trade and industry in Singapore.

Slowing Inflation in Singapore

• Overview: Price increases in Singapore are slowing down. February marked the fifth consecutive month of easing core inflation.
• Core Inflation: Fell to 0.6% in February, down from 0.8% in January.
• Headline Inflation: Cooled to 0.9% in February, down from 1.2% in January. Headline inflation accounts for accommodation and private transport.

Factors Contributing to Declining Inflation

• Return to Pre-Pandemic Norms: Analysts attribute the trend to a return to pre-pandemic inflation levels.
• Pent-up Travel Demand: Decline in holiday expenses due to pent-up travel demand being satisfied. This contributed to a dip in services inflation.
• Slowing Price Increases in Other Segments: Price increases have slowed in food and private transport sectors.
• Government Policies: Changes in qualification criteria for public hospitals and medical care contributed to lower health inflation, as observed in January. Lower preschool fee caps also played a role.
• Post-Pandemic Trend Shift: Inflation, which was previously hovering around 2-3% in the initial part of the post-pandemic period, has begun to change significantly, particularly in January and February data.

Potential Risks and Uncertainties

• Global Uncertainty: Ongoing global uncertainty could pose risks of higher costs and a return of inflation.
• Supply Chain Pressures: If supply chain pressures resurface, it could lead to increased costs.
• Tariffs: Tariffs can cause shortages and diversions, potentially leading to inflation.
• Climate Change: Weather-related disruptions caused by climate change could trigger inflation.
• Trump's Tariffs: The possibility of Trump's tariffs causing a global recession is mentioned as a risk factor.

Market Outlook and Forecasts

• Stable Situation: Market watchers consider the current situation to be stable.
• Headline Inflation Forecast: The Monetary Authority of Singapore (MAS) and the Trade Industry Ministry (MTI) expect headline inflation to be between 1.5% and 2.5% for the full year.
• Lower Than 2024: This forecast is lower than the inflation rates observed in 2024.

Notable Quotes:

• "Last year we saw especially in the initial part um inflation still uh hovering um at you know 2 3% levels which is basically something that um that that basically it's a continuation of the uh Trend that we see over the uh post pandemic years where inflation was high and sticky but that's that that has begun to change and that has changed in a big way uh during the January and February data."
• "The changes in the qualification criteria for for for public uh for public hospitals and Medical Care uh that does play into lower lower health inflation and I think we saw that uh in in January as well right and lower preschool fee caps"
• "...if the supply chain pressure start to come in again tariffs cause a lot of shortages and diversion everywhere or climate change cause red weather related disruptions cause inflation to out again or if let's say Trump's tariff cause a global recession so there's really a lot of factors that can cause inflation to go out of hand"

Synthesis/Conclusion:

Singapore is experiencing a slowdown in inflation, attributed to factors like the normalization of travel demand, easing supply chain pressures, and government policies. While the outlook appears stable with projected headline inflation between 1.5% and 2.5% for the year, ongoing global uncertainties, potential supply chain disruptions, tariffs, and climate change-related events pose risks that could reverse this trend. The MAS and MTI's forecast suggests a more moderate inflationary environment compared to the previous year, but vigilance is required to manage potential external shocks.