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25-01-2011, 08:21 AM
Business Times - 25 Jan 2011
Dec inflation hits 4.6%, a 2-year high
High inflation, if sustained, could prompt MAS to act
By conRAD TAN
(SINGAPORE) Inflation accelerated in December to its fastest pace in two years, exceeding earlier official forecasts and fuelling expectations that the Monetary Authority of Singapore (MAS) could act to dampen further price increases this year.
Consumer prices rose 4.6 per cent over the year to December, the fastest increase since December 2008, due mainly to higher prices for transport, housing and food, the Department of Statistics (DOS) said yesterday. Those three items make up 63 per cent of the consumer price index (CPI) that is used to track price changes.
Over the month, prices rose 0.9 per cent, after adjusting for seasonal factors - the sixth straight monthly increase and the biggest jump since April 2008.
'Additional monetary tightening is likely on the cards,' said Leif Eskesen, chief economist for India and Asean at HSBC.
'It's not a comforting reading for MAS, especially considering that capacity is tight and global commodity and food prices pose further risks.'
On average, consumer prices in 2010 were 2.8 per cent higher than in 2009 - within the 2.5-3 per cent range forecast by MAS.
But the December CPI reading exceeded MAS's estimate in October that the annual pace of CPI inflation would reach 'around 4 per cent' by end-2010, before slowing to around 2 per cent in the second half of 2011. Worries about rising inflation, particularly from higher global food prices, prompted MAS to act that month to strengthen the Singapore dollar, which helps to curb inflation directly by making imports such as foodstuffs cheaper.
A stronger currency also works indirectly - and more slowly - to ease domestic inflation pressures by making Singapore's exports less competitive in the short term, reducing demand for workers and slowing the increase in wages and other business costs here as a result.
But with the economy growing faster than expected in the fourth quarter, many economists had already warned that inflation pressure would continue to build.
David Cohen, director of Asian forecasting at Action Economics, said MAS would likely wait to see if inflation moderates before deciding on further action. Its next monetary policy meeting is in April.
'Certainly, I don't think they'll feel compelled to take any measure before their semi-annual review,' he said.
In its monthly inflation outlook published yesterday, MAS said it expects CPI inflation 'will be higher over the next few months' due to rising prices both within and outside Singapore. But 'inflation is expected to moderate more significantly in H2 2011', it added.
'We don't think the December figure is too alarming,' OCBC economist Selena Ling said. 'But the risks are tilted towards the upside for inflation, and if you have sustained, elevated inflation, that gets translated into inflation expectations and if that becomes unanchored, that's the worst nightmare for policymakers.'
The most recent government measures to cool the property market should keep housing price inflation in check, UOB economist Chow Penn Nee said.
'We expect accommodation costs to abate slightly on the government's recent aggressive measures to curb property prices.'
Prices rose fastest for higher-income households in 2010, unlike in 2008 and 2009, when low-income households were the hardest hit by inflation, separate data published by the DOS show.
On average, consumer prices in 2010 were 3.1 per cent higher than in 2009 for the highest-earning one-fifth of households by income. The inflation rate was 2.4 per cent for the bottom one-fifth of households by income, and 2.7 per cent for the remaining three-fifths of households in the middle.
The main items contributing to the price increases for all income groups were cars, food, electricity tariffs and petrol.
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Straits Times
Jan 25, 2011
Inflation hits highest level since 2008
The rich are feeling a bigger pinch as car and petrol costs escalate
By Fiona Chan & Elgin Toh
A SURGE in car and petrol prices sent inflation last month soaring to its highest level in two years.
The consumer price index - the main measure of inflation - rose 4.6 per cent over the same month a year ago, the Department of Statistics said yesterday.
The pace of inflation also picked up: On a seasonally adjusted basis, prices rose 0.9 per cent last month from the previous month, a faster rate than the increase from October to November.
Economists expect the pace of price rises to stay elevated in the coming months, with some even predicting that inflation for the full year will come in higher than the official forecast of 2 per cent to 3 per cent.
'Inflation will likely stay above 4 per cent in early 2011,' said Bank of America Merrill Lynch economist Chua Hak Bin, who is anticipating full-year inflation of 3.2 per cent.
But two other reports out yesterday offered some bright spots.
The first, also issued by the Department of Statistics, noted that richer people suffered the brunt of inflation last year - a departure both from previous years and from conventional wisdom.
Overall inflation came in at 2.8 per cent last year. But prices rose only 2.4 per cent for the poorest 20 per cent of Singaporean households, while they climbed 3.1 per cent for the richest 20 per cent, the DOS said.
This represents a turnaround compared with recent years.
In 2008, prices rose 7.8 per cent for the poorest households but only 6.1 per cent for the richest ones. The contrast was even starker in 2009: Inflation was 2.1 per cent for the poor but -0.1 per cent for the rich.
One explanation for the unusual phenomenon is that two-thirds of inflation last year stemmed from rising car costs due to the squeeze in certificates of entitlement (COE). COE prices doubled or tripled to decade-highs last year, and petrol prices jumped by 8 per cent to 9 per cent.
Richer households were worse hit because they tend to drive cars and consume petrol, so they spend more on transport: It makes up 18.2 per cent of the typical basket of goods they consume, compared with 7.2 per cent for the poor.
'Those among the higher income group who avoided buying cars or who used their cars less might have experienced lower inflation,' said economist Song Seng Wun of CIMB Bank.
The other heartening report came from the Monetary Authority of Singapore (MAS). In its monthly report on inflation, the MAS said that while inflation will be higher over the next few months, it is expected to 'moderate more significantly' in the second half of the year.
Underlying inflation, which excludes car and housing costs, is 'likely to see only moderate increases in the next few months before also easing in the latter half of the year', the MAS added.
But in the meantime, the recent surge in COE premiums and global food prices will continue to boost headline inflation, it said.
Last month, transport costs shot up 12.8 per cent compared with the same month a year ago, the Department of Statistics said. Food prices rose 2.1 per cent in the same period.
For the whole of last year, transport costs went up 10.3 per cent compared with the previous year, while food prices increased 1.4 per cent. Housing costs rose 2 per cent and education and stationery costs climbed 2.7 per cent.
Yesterday's figures added to economists' expectations that the MAS will stick to or even accelerate its policy of appreciation in the Singapore dollar in its April monetary policy review.
High food prices and growing wage pressures could lead the MAS to let the Sing dollar strengthen on a steeper slope, said Barclays Capital economist Leong Wai Ho.
fiochan@sph.com.sg
elgintoh@sph.com.sg
Dec inflation hits 4.6%, a 2-year high
High inflation, if sustained, could prompt MAS to act
By conRAD TAN
(SINGAPORE) Inflation accelerated in December to its fastest pace in two years, exceeding earlier official forecasts and fuelling expectations that the Monetary Authority of Singapore (MAS) could act to dampen further price increases this year.
Consumer prices rose 4.6 per cent over the year to December, the fastest increase since December 2008, due mainly to higher prices for transport, housing and food, the Department of Statistics (DOS) said yesterday. Those three items make up 63 per cent of the consumer price index (CPI) that is used to track price changes.
Over the month, prices rose 0.9 per cent, after adjusting for seasonal factors - the sixth straight monthly increase and the biggest jump since April 2008.
'Additional monetary tightening is likely on the cards,' said Leif Eskesen, chief economist for India and Asean at HSBC.
'It's not a comforting reading for MAS, especially considering that capacity is tight and global commodity and food prices pose further risks.'
On average, consumer prices in 2010 were 2.8 per cent higher than in 2009 - within the 2.5-3 per cent range forecast by MAS.
But the December CPI reading exceeded MAS's estimate in October that the annual pace of CPI inflation would reach 'around 4 per cent' by end-2010, before slowing to around 2 per cent in the second half of 2011. Worries about rising inflation, particularly from higher global food prices, prompted MAS to act that month to strengthen the Singapore dollar, which helps to curb inflation directly by making imports such as foodstuffs cheaper.
A stronger currency also works indirectly - and more slowly - to ease domestic inflation pressures by making Singapore's exports less competitive in the short term, reducing demand for workers and slowing the increase in wages and other business costs here as a result.
But with the economy growing faster than expected in the fourth quarter, many economists had already warned that inflation pressure would continue to build.
David Cohen, director of Asian forecasting at Action Economics, said MAS would likely wait to see if inflation moderates before deciding on further action. Its next monetary policy meeting is in April.
'Certainly, I don't think they'll feel compelled to take any measure before their semi-annual review,' he said.
In its monthly inflation outlook published yesterday, MAS said it expects CPI inflation 'will be higher over the next few months' due to rising prices both within and outside Singapore. But 'inflation is expected to moderate more significantly in H2 2011', it added.
'We don't think the December figure is too alarming,' OCBC economist Selena Ling said. 'But the risks are tilted towards the upside for inflation, and if you have sustained, elevated inflation, that gets translated into inflation expectations and if that becomes unanchored, that's the worst nightmare for policymakers.'
The most recent government measures to cool the property market should keep housing price inflation in check, UOB economist Chow Penn Nee said.
'We expect accommodation costs to abate slightly on the government's recent aggressive measures to curb property prices.'
Prices rose fastest for higher-income households in 2010, unlike in 2008 and 2009, when low-income households were the hardest hit by inflation, separate data published by the DOS show.
On average, consumer prices in 2010 were 3.1 per cent higher than in 2009 for the highest-earning one-fifth of households by income. The inflation rate was 2.4 per cent for the bottom one-fifth of households by income, and 2.7 per cent for the remaining three-fifths of households in the middle.
The main items contributing to the price increases for all income groups were cars, food, electricity tariffs and petrol.
--------------------
Straits Times
Jan 25, 2011
Inflation hits highest level since 2008
The rich are feeling a bigger pinch as car and petrol costs escalate
By Fiona Chan & Elgin Toh
A SURGE in car and petrol prices sent inflation last month soaring to its highest level in two years.
The consumer price index - the main measure of inflation - rose 4.6 per cent over the same month a year ago, the Department of Statistics said yesterday.
The pace of inflation also picked up: On a seasonally adjusted basis, prices rose 0.9 per cent last month from the previous month, a faster rate than the increase from October to November.
Economists expect the pace of price rises to stay elevated in the coming months, with some even predicting that inflation for the full year will come in higher than the official forecast of 2 per cent to 3 per cent.
'Inflation will likely stay above 4 per cent in early 2011,' said Bank of America Merrill Lynch economist Chua Hak Bin, who is anticipating full-year inflation of 3.2 per cent.
But two other reports out yesterday offered some bright spots.
The first, also issued by the Department of Statistics, noted that richer people suffered the brunt of inflation last year - a departure both from previous years and from conventional wisdom.
Overall inflation came in at 2.8 per cent last year. But prices rose only 2.4 per cent for the poorest 20 per cent of Singaporean households, while they climbed 3.1 per cent for the richest 20 per cent, the DOS said.
This represents a turnaround compared with recent years.
In 2008, prices rose 7.8 per cent for the poorest households but only 6.1 per cent for the richest ones. The contrast was even starker in 2009: Inflation was 2.1 per cent for the poor but -0.1 per cent for the rich.
One explanation for the unusual phenomenon is that two-thirds of inflation last year stemmed from rising car costs due to the squeeze in certificates of entitlement (COE). COE prices doubled or tripled to decade-highs last year, and petrol prices jumped by 8 per cent to 9 per cent.
Richer households were worse hit because they tend to drive cars and consume petrol, so they spend more on transport: It makes up 18.2 per cent of the typical basket of goods they consume, compared with 7.2 per cent for the poor.
'Those among the higher income group who avoided buying cars or who used their cars less might have experienced lower inflation,' said economist Song Seng Wun of CIMB Bank.
The other heartening report came from the Monetary Authority of Singapore (MAS). In its monthly report on inflation, the MAS said that while inflation will be higher over the next few months, it is expected to 'moderate more significantly' in the second half of the year.
Underlying inflation, which excludes car and housing costs, is 'likely to see only moderate increases in the next few months before also easing in the latter half of the year', the MAS added.
But in the meantime, the recent surge in COE premiums and global food prices will continue to boost headline inflation, it said.
Last month, transport costs shot up 12.8 per cent compared with the same month a year ago, the Department of Statistics said. Food prices rose 2.1 per cent in the same period.
For the whole of last year, transport costs went up 10.3 per cent compared with the previous year, while food prices increased 1.4 per cent. Housing costs rose 2 per cent and education and stationery costs climbed 2.7 per cent.
Yesterday's figures added to economists' expectations that the MAS will stick to or even accelerate its policy of appreciation in the Singapore dollar in its April monetary policy review.
High food prices and growing wage pressures could lead the MAS to let the Sing dollar strengthen on a steeper slope, said Barclays Capital economist Leong Wai Ho.
fiochan@sph.com.sg
elgintoh@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/