Deflation deepens in Singapore despite rising food prices, currency weakens further

The consumer price index fell 0.8% in February, deeper than the 0.6% fall happened in January.

Deflation has deepened in Singapore thanks to steeper declines in accommodation and private road transport costs, sending the Singapore currency further away from recent highs.

The consumer price index fell 0.8% in the second month of the year, deeper than the 0.6% fall happened in January, Statistics Singapore said on 23 March.

The Singapore dollar fell 0.6% on the day to 1.3683/US dollar, distancing further away from the multi-month high of 1.3479 touched on 19 March. The STI index, the benchmark share index for Singapore, traded down, tracking its regional peers.

However, core inflation - which strips out both of the components - edged up to 0.5% in February from 0.4% a month earlier.

Analysts polled by agencies like Bloomberg had forecast headline inflation at -0.7% and core inflation around 0.3%.

Details showed that private road transport costs fell 3.9% compared with the 1.8% drop in January, owing to weaker Certificate of Entitlement (COE) premiums.

Additionally, accommodation cost dropped 3.2% adding to the 3.1% decline showed in January.

At the same time, food inflation was 2% accelerating from 1.7% in January, due to a larger increase in the prices of prepared meals including restaurant, hawker, and fast food.

Overall services inflation was 0.5% in February - unchanged from January.

"While domestic services cost saw a stronger pickup, this was offset by a more moderate increase in holiday expenses," said the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) in joint comments.

MAS and MTI retained their 2016 inflation forecasts at -1% to flat for overall inflation, and 0.5-1.5% for core inflation.