SINGAPORE: After achieving multi-year highs on the strength of a strong economy, inflation is swiftly emerging as a key concern this year “External and local causes have combined to create a “perfect storm.”
According to the most recent official figures, Singapore’s headline or total inflation for December increased to 4% from 3.8 percent in November, a near nine-year high.
On a year-over-year basis, core inflation, which includes accommodation and private transportation, increased to 2.1 percent from 1.6 percent the previous month. According to Reuters, this was the indicator’s highest value since July 2014.
After a brief period of negative inflation in 2020 due to falling demand during the COVID-19 epidemic, cost pressures have risen quickly.
The Monetary Authority of Singapore (MAS) made a surprise inter-meeting policy decision last week in response to rising inflation.
The central bank, which usually meets in April and October, announced on January 25 that it will meet in March “increase the nominal effective exchange rate policy band for the Singapore dollar by a little amount”
This effectively permits the Singapore currency to gain, lowering import prices and so protecting Singapore consumers’ and enterprises’ purchasing power.
The MAS said its new action “builds on the pre-emptive shift to an appreciating stance” it made last October, when it startled markets by boosting the slope of its policy range, and is “suitable for ensuring medium-term price stability.”
What is the inflation rate in Singapore in 2021?
You know inflation has arrived on our little red dot when your $2 chicken rice has become an urban legend and the price of your $2.50 plate has risen to $3. While our grandparents (or even parents) frequently moan about how costly goods have become in Singapore, their comments this year ring true.
Singapore’s headline inflation rate, or Consumer Price Index (CPI)-All Items Inflation, rose to 2.3 percent in 2021 from -0.2 percent in 2020, while MAS Core Inflation rose to 0.9 percent in 2021 from -0.2 percent in 2020. The Consumer Price Index (CPI) – All Items in Singapore covers all categories, however the MAS Core Inflation Measure excludes two major spending categories: “Accommodation,” which is a subset of Housing & Utilities, and “Private Road Transportation,” which is a subset of Transportation.
Instead of generalizing about how expensive things are, let’s look at the precise Consumer Price Index for 2021, provided by the Singapore Department of Statistics, to see what ordinary items and services have become more expensive.
Also see: Singapore Inflation Rate in 2020: How Much Have Prices Increased For Everyday Goods And Services?
The Consumer Price Index Is A Reflection Of Everyday Prices
The Consumer Price Index (CPI) is a weighted measure of average price changes over time for a defined basket of goods and services typically purchased by resident households. Singapore’s CPI data dates back to the 1960s, albeit the category information is not as detailed as it is today. The CPI must be revised to reflect changes in the weighting and types of goods and services as household consumption patterns vary over time. This rebasing was completed most recently in 2019.
While the order of the categories kept the same (housing & utilities, food, and transportation remained the top three), the weightings for each category changed. Food, housing & utilities, and clothing & footwear had lower weights, whereas transportation, communication, education, health care, and household durables had higher weights.
The inflation rate in 2021 was not a consistent 2.3 percent. Clothing & Footwear, Communications, and Miscellaneous Goods & Services all became less expensive, while the rest of the categories increased in price.
#1 Housing & Utilities (Increased 1.4% From 2020)
Most households’ greatest expense category is housing, which accounts for 24.8 percent of the CPI’s weightage. In 2021, the housing market saw record-breaking prices for both HDB resale apartments and private property, but the cost of living has thankfully not increased at the same rate. In 2021, the cost of accommodation climbed by 1.4 percent, while the cost of utilities increased by 1%.
This is most likely owing to Singaporeans’ high rate of property ownership. The cost of our homes would not be directly affected by rising housing prices for most households who are not moving or buying a new home. In fact, because interest rates are expected to continue low in 2021, consumers repaying mortgages may find it cheaper to make payments if they refinance their loans.
#2 Food (Increased 1.4% From 2020)
For most households, food is the second most expensive category (21.1 percent). You were correct if you assumed that food will grow more costly in 2021. Overall, the cost of food (including food and food service) has grown by 1.4 percent.
This rise in food prices is not only local in Singapore, but global as well. According to the Food and Agriculture Organization of the United Nations, global food prices climbed by 28% in 2021. (FAO). Harvest failures, rising demand, and higher crop input costs were all blamed.
Food prices in Singapore have risen by 1.6 percent (excluding food serving services). All food categories increased, with vegetables showing the largest increase of 5.2 percent, followed by fruits with a 2.7 percent increase, and meat with a 0.3 percent increase.
Restaurant, fast food, hawker, and catered food services all grew by 1.4 percent. Fast food had the largest rise among these services, at 1.6 percent, followed by hawker food at 1.5 percent.
What is the inflation rate in Singapore in 2022?
FocusEconomics Consensus Forecast panelists expect inflation to average 2.8 percent in 2022, which is up 0.5 percentage points from the previous month’s forecast. Inflation is expected to average 1.8 percent in 2023, according to our panel.
What will be the rate of inflation in 2021?
The United States’ annual inflation rate has risen from 3.2 percent in 2011 to 4.7 percent in 2021. This suggests that the dollar’s purchasing power has deteriorated in recent years.
Is Singapore’s inflation high?
SINGAPORE: Core inflation in Singapore increased to 2.4 percent in January, the highest level in more than nine years, according to government figures issued on Wednesday (Feb 23).
This was due to increased food, energy, and gas inflation, as well as a slower rate of fall in the cost of retail and other items, according to a joint media statement from the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI).
The increase in January was the largest year-over-year increase since September 2012, when core inflation reached 2.4%.
The headline consumer price index, or overall inflation, for January was steady from the previous month at 4% year on year.
Accommodation and private transportation costs are not included in core inflation. These goods are removed because they are volatile and are heavily influenced by supply-side administrative policies.
“Global inflation has recently risen further and may remain high for some time before reducing in the second part of the year,” MAS and MTI warned.
“Crude oil prices will remain elevated in the short term due to increased geopolitical threats and tight supply conditions.”
“Global transportation bottlenecks, as well as labor shortages in a number of Singapore’s main trading partners, are likely to persist.”
Is Singapore’s inflation rate low?
The numbers aren’t deceiving. Singapore’s headline inflation rate increased to 4% in December 2021, exceeding the 3.7 percent forecast. In February 2013, Singapore’s headline inflation rate exceeded 4% for the first time. Similarly, in December 2021, the core inflation rate was 2.1 percent, the highest since July 2014. The large rise in plane tickets and COVID-19 testing expenses under Singapore’s VTL schemes contributed significantly to these results.
What is a reasonable rate of inflation?
The Federal Reserve has not set a formal inflation target, but policymakers usually consider that a rate of roughly 2% or somewhat less is acceptable.
Participants in the Federal Open Market Committee (FOMC), which includes members of the Board of Governors and presidents of Federal Reserve Banks, make projections for how prices of goods and services purchased by individuals (known as personal consumption expenditures, or PCE) will change over time four times a year. The FOMC’s longer-run inflation projection is the rate of inflation that it considers is most consistent with long-term price stability. The FOMC can then use monetary policy to help keep inflation at a reasonable level, one that is neither too high nor too low. If inflation is too low, the economy may be at risk of deflation, which indicates that prices and possibly wages are declining on averagea phenomena linked with extremely weak economic conditions. If the economy declines, having at least a minor degree of inflation makes it less likely that the economy will suffer from severe deflation.
The longer-run PCE inflation predictions of FOMC panelists ranged from 1.5 percent to 2.0 percent as of June 22, 2011.
Is inflation bad for business?
Inflation isn’t always a negative thing. A small amount is actually beneficial to the economy.
Companies may be unwilling to invest in new plants and equipment if prices are falling, which is known as deflation, and unemployment may rise. Inflation can also make debt repayment easier for some people with increasing wages.
Inflation of 5% or more, on the other hand, hasn’t been observed in the United States since the early 1980s. Higher-than-normal inflation, according to economists like myself, is bad for the economy for a variety of reasons.
Higher prices on vital products such as food and gasoline may become expensive for individuals whose wages aren’t rising as quickly. Even if their salaries are rising, increased inflation makes it more difficult for customers to determine whether a given commodity is becoming more expensive relative to other goods or simply increasing in accordance with the overall price increase. This can make it more difficult for people to budget properly.
What applies to homes also applies to businesses. The cost of critical inputs, such as oil or microchips, is increasing for businesses. They may want to pass these expenses on to consumers, but their ability to do so may be constrained. As a result, they may have to reduce production, which will exacerbate supply chain issues.
What will be the rate of inflation in 2023?
According to our econometric models, the United States Inflation Rate is expected to trend at 1.90 percent in 2023.
RELATED: Inflation: Gas prices will get even higher
Inflation is defined as a rise in the price of goods and services in an economy over time. When there is too much money chasing too few products, inflation occurs. After the dot-com bubble burst in the early 2000s, the Federal Reserve kept interest rates low to try to boost the economy. More people borrowed money and spent it on products and services as a result of this. Prices will rise when there is a greater demand for goods and services than what is available, as businesses try to earn a profit. Increases in the cost of manufacturing, such as rising fuel prices or labor, can also produce inflation.
There are various reasons why inflation may occur in 2022. The first reason is that since Russia’s invasion of Ukraine, oil prices have risen dramatically. As a result, petrol and other transportation costs have increased. Furthermore, in order to stimulate the economy, the Fed has kept interest rates low. As a result, more people are borrowing and spending money, contributing to inflation. Finally, wages have been increasing in recent years, putting upward pressure on pricing.