Singapore CPI Inflation returns after two years

Core inflation, excluding accommodation and private road transport stands at 1.2 percent.

singapore inflation 2016
Customers shop at a vegetable and fruits wholesale market in Singapore August 22, 2013. Reuters

Singapore's headline consumer price index rose marginally in December, breaking a record two years of negative inflation, helped by a 1.7 percent increase in private road transport cost.

The 0.2 percent increase in headline inflation in December compared with the previous year augured well for the economy but tepid consumption and a struggling labour market would make any substantial growth in inflation unlikely, analysts said.

The rise in transport costs was fuelled by higher petrol prices and car park fees, the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said in a report on Monday. While food inflation was 2 percent, the services inflation rose to 1.6 percent compared with 1.5 percent in November.

A drop in personal care products pushed retail goods inflation to zero percent in December. Core inflation, excluding accommodation and private road transport, stood at 1.2 percent compared with 1.3 percent in November.

"A return to positive headline CPI inflation disguises underlying softness, given the absence of more generalised demand-induced pressures," ANZ economist Weiwen Ng said in a note, according to Today.

"Domestic cost pressures will be muted, owing to a subdued labour market which will put a lid on wage growth. Furthermore, a moderation in commercial rentals will exert a strong disinflationary drag," the note added.

Economists last month slashed their forecast for the growth of Singapore economy in 2017 in line with the weak global fundamentals and a sustained downward shift in GDP and export expansion in the trade-reliantcountry.

According to the latest survey by the Singapore central bank, private economists projected that growth would drop to 1.4 percent this year compared with a previous forecast of 1.8 percent growth. For 2017, the projected growth rate is a marginally faster 1.5 percent. Previous estimates of 2017 growth were pegged at 1.8 percent.