In Focus
ECONOMY | Staff Reporter, Singapore

Inflation to stay above the 3% mark, says analyst

And the island country awaits as headline inflation data for May is due today.

DBS Group Research said, "The reading of the price barometer will most certainly bring some sigh of relief for policymakers amid the rising downside risk to growth."

Here's more:

CPI inflation is expected to report a 4.1% YoY increase, down from 4.5% in the previous months. Base effect from the high COE prices will gradually get eroded away, leading to lower transport CPI inflation. Moderations in both global fuel and food prices in the month may also bring about lower food and energy related inflation. That said, inflation will stay above the 3% mark for the rest of the year. Higher labour costs will eventually get passed on to end consumers. A tight labour with unemployment rate at 1.9%, below the full employment level, will drive wages higher. A stricter foreign labour policy along with hikes in employer CPF contribution rate will surely contribute further to wage inflation. The risk is that such wage driven inflation pressure could prove to be more persistent and broadbased. Latest employment data has shown that there are more jobs available than unemployed person. Specifically, there are 1.39 job vacancies for every one unemployed person. The upward pressure on wages and consequently on inflation will be the key factor keeping inflation above the historical norm going forward.

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