Wednesday 27 June 2012

Inflation eases slightly to 5% in May 2012

It falls from 5.4% but pricier housing, transport keep May index elevated
By Magdalen Ng, The Straits Times, 26 Jun 2012

INFLATION moderated slightly last month but stayed elevated, on the back of pricier accommodation and transport.

The Consumer Price Index (CPI) rose 5 per cent in May, from the same month a year earlier, just below the market consensus of 5.1 per cent.

That was a fall from April's 5.4 per cent.

Once again, housing and transport costs were the main culprits, rising 8.2 per cent and 9.2 per cent respectively.

These two items accounted for nearly two-thirds of inflation last month, although all segments of the CPI recorded increases.

Food prices were up 2.5 per cent, and health-care costs rose 4.3 per cent.

The lower inflation rate was due to a more 'moderate rise in the prices of oil-related items and accommodation costs', said the Monetary Authority of Singapore and the Ministry of Trade and Industry in a joint statement.

Accommodation cost inflation fell from 12.7 per cent in April to 9 per cent last month, as payouts of rebates for service and conservancy charges for Housing Board households eased this cost factor.

The price rise for domestic oil-related items such as utilities and liquefied petroleum gas fell to 7.8 per cent, from 8.9 per cent in April.

Private road transport costs spiked to 10.3 per cent last month from April's 8.2 per cent, as certificate of entitlement (COE) prices soared. Stripping out private road transport and accommodation costs, the MAS measure of 'core inflation' remained unchanged from April at 2.7 per cent.

Despite headline inflation numbers easing slightly, experts expect a respite from climbing prices to come only in a few months.

Citigroup economist Kit Wei Zheng said the slowing rate of inflation last month was 'arguably artificially depressed by the effect of the service and conservancy rebates on housing'.

He added that the base effect from car and housing costs should moderate headline inflation in the second half of the year to about 4 per cent.

Barclays Capital economist Leong Wai Ho also expects June's CPI to be more than 5 per cent, before moderating in July, and Bank of America Merrill Lynch economist Chua Hak Bin sees headline CPI falling below 4 per cent by end-September.

But Dr Chua added: 'Wage cost pressures may, however, intensify with further foreign labour tightening measures from July 1.'

Mr Kit said: 'Other pent-up business costs, such as the doubling of goods vehicles' COE premiums, may also continue to be passed through to consumer prices.'

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