CPI rises 5.3 per cent in June as accommodation, transport costs soar

SINGAPORE - Singapore's consumer price index in June rose 5.3 per cent from a year earlier, the government said on Monday, accelerating from May's 5.0 per cent rise as accommodation and private road transport costs continued to soar.

June's inflation number was slightly above the 5.2 per cent median forecast of 13 economists polled by Reuters.

The Monetary Authority of Singapore's (MAS) core inflation measure rose 2.7 per cent year-on-year and was flat month-on-month, compared with May's 2.7 per cent annual gain and 0.1 per cent month-on-month decline.

Singapore's core inflation excludes the cost of accommodation and private road transport, which are strongly influenced by government policy, and is the figure the MAS pays more attention to when deciding monetary policy.

The Ministry of Trade and Industry and the MAS said in a joint statement that 'core inflation will ease further in H2 2012 and average between 2.5-3.0 per cent for the whole year'.

- But headline inflation, while likely to be lower in the second half, is expected to be in the upper half of the 3.5 to 4.5 per cent official forecast for 2012, MTI and MAS added.

CIMB Research economist Song Seng Wun said: 'It's a tad higher than expected. It's always a case of playing cat and mouse with the two culprits - housing or private transportation CPI.'

'This time it was the housing rental side which caused the CPI to be a little bit more firm than what we were going for.'

'The good thing is that despite the ups and downs of housing and private transportation costs, the underlying inflation - the MAS core - remained relatively stable at 2.7 per cent.'

'Our headline inflation forecast for this year is still 4.5 to 5 per cent, which is outside the upper bounds of the government's 4.5 per cent mainly due to the stickiness of housing rentals and COE (certificate of entitlement to buy a new vehicle) prices.'

'There's also risk partly from the relatively firm labour market as well as potential risk from higher food inflation.'

Barclays regional economist Wai Ho Leong said: 'The acceleration from 5 per cent in May to 5.3 per cent in June reflected the base effect because of the discontinuation of rebates in housing, service and conservancy charges. Because of this, the comparison with last June will cause this base effect.'

''From a month on month perspective, inflation was quite contained. Core inflation remained sticky but did not rise.'

'We expect high 3 to 4 per cent percents in the second half of the year. But volatility is going to be quite substantial given the drop in quota for COEs. We already saw the bidding for July was quite aggressive and premiums rose to all-time highs.'

'If that kind of situation continues, there will be some upside risk to inflation. However, the global situation is not that great. Right now, chances of (inflation breaching 4.5 per cent) remain quite low.'