Steeper rise in CPI for August

Steeper rise in CPI for August

Posted: 23 September 2011 1307 hrs

Shoppers pay for their groceries at check-out counters at a supermarket in Singapore

SINGAPORE : Singapore's inflation rate is now at its highest in almost three years.

In August, the consumer price index rose 5.7 per cent, much higher than many had expected and up from July's 5.4 per cent.

Despite the possibility of a global recession, inflation in Singapore showed no signs of abating, rising for the third consecutive month.

Even industry experts were stumped.

Song Seng Wun, an economist at CIMB, said: "What caught everybody off (guard) was the steep climb in the private transport CPI itself ... the COE premium, that had been rising all the way ... into August itself."

Aside from higher costs of private road transport which increased 12.5 per cent, the other factor was the rise in accommodation costs which increased by nearly 10 per cent. Meanwhile, food prices rose by 3 per cent.

But the good news is that inflation is expected to moderate for the rest of the year.

Looking ahead, industry observers said inflationary pressures should moderate slightly, given the likelihood of dampened consumer sentiment.

Mr Song said: "COE prices, which are already coming off, will trail off; the housing component, the rental revision will start to reflect the cautious environment."

With inflationary pressures shifting to concerns over growth, focus will fall on the Monetary Authority of Singapore's (MAS) direction for Singapore dollar next month.

Most agree that it would be unsustainable for the Singapore dollar to continue its steep appreciation trend, with the growing weakness in the export sector.

Wu Kun Lung, an economist at Credit Suisse, said: "The dilemma is this inflation and growth trade-off. So with this in mind, MAS would want to keep as flexible as possible. The Singapore dollar will continue to appreciate against its trading partners but at a slower pace."

Whatever the outcome, it will probably be prudent to adopt a more cautious outlook for the months ahead.


Via: http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1155036/1/.html