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Aug CPI up 3.3% on higher transport, housing, food costs
24-09-2010, 04:13 AM.
Post: #1
Aug CPI up 3.3% on higher transport, housing, food costs
OK, so as long as your yield is above 3.3%, you can safely declare that you have "beaten inflation"! Tongue

Business Times - 24 Sep 2010

Aug CPI up 3.3% on higher transport, housing, food costs


By LYNN KAN

THE cost of living in Singapore continued to rise in August, the latest figures from the Department of Statistics (DOS) show.

And economists see inflation continuing for the rest of this year - though they do not expect the Monetary Authority of Singapore (MAS) to tighten the Sing-dollar exchange rate policy at its upcoming October meeting.

The Consumer Price Index (CPI) - which shows inflation or deflation - moved up 3.3 per cent from August 2009 due to more expensive transport, housing and food. Excluding accommodation costs, the CPI rose 3.7 per cent from a year earlier. The cost of transport rose 9 per cent due to higher car prices and car insurance premiums.

DBS economist Irvin Seah said this cost looks to remain high, but 'such policy-induced inflationary impact tends to be transient in nature and will eventually run its course on account of its own base effect'.

Housing costs increased 3.1 per cent due to higher electricity tariffs and accommodation costs.

Food prices edged up 1.7 per cent, triggered by 'the recent spike in wheat prices and surging meat prices', Citi economists Kit Wei Zheng and Brian Tan said in a report.

The CPI rose 0.5 per cent in August from July, lifted by dearer transport, clothing and footwear and housing costs. Excluding accommodation costs, the month-on-month CPI increase was 0.5 per cent.

Seasonally adjusted, the CPI was up 0.3 per cent.

DOS said: 'With dearer ready-made garments and footwear, prices of clothing and footwear rose 2.5 per cent.' It said the 0.7 per cent rise in transport costs stemmed mainly from higher prices of cars and petrol, but this was a moderation from July's month-on-month rise of 1.7 per cent.

The Citi economists said the deceleration in transport costs came as increases in certificate of entitlement (COE) premiums returned to the single-digit range.

Housing costs rose 0.3 per cent month on month, which Citi's Mr Kit and Mr Tan suspect was caused by higher rents.

Economists from both Citi and DBS expect inflation to persist through the end of the year. Citi pegs the year-end inflation rate to reach 4 per cent, and DBS expects it to come in within MAS's target range of 2.5 to 3.5 per cent.

But both groups do not expect MAS to intervene in exchange rate policies to tame it.

This has to do with their observations that inflationary pressures have so far been caused by domestic drivers such as COE spikes and housing costs.

'Given that our exchange rate policy is largely externally driven and its direct impact is mainly on import costs, further tightening of the exchange rate policy will have a limited effect on this domestically driven inflation,' said Mr Seah.

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