MAS core inflation slows to a 0.1% decline in September

Inflation is expected to come fall between -0.5% to 0% for 2020.

Meanwhile, the MAS core inflation improved to a -0.1% decline in September from a -0.3% decrease in the month previously, according to the latest data from the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI).

This was mainly driven by smaller reductions in the cost of services and electricity & gas.

The MAS core inflation excludes components of accommodation and private transport in its measurement.

Meanwhile, the CPI All-Items inflation remained unchanged in September, an improvement from the 0.4% decline recorded in August. The was thanks to a more graduate decrease in private transport costs, which slowed to -0.1% in September from -2.3% in the previous month.

The consumer price index (CPI) measures the average price changes in a fixed basket of consumption goods and services commonly purchased by the resident households over time. It is commonly used to measure consumer price inflation.

Overall, both MAS core inflation and the CPI All-Items inflation are expected to come in between -0.5% to 0% in 2020.

By sector, services costs fell more modestly at -0.1% in September from -0.5% in the previous month as a result of steeper increase in telecommunication service fees, as well as a smaller drop in tuition & other fees.

The cost of electricity and gas also registered a slightly lower decline at -14.2% from -14.6% a month earlier, on the back of slower take-up of new subscriptions under the Open Electricity Market (OEM).

Meanwhile, the price of retail & other goods fell at the same rate as in August at -1.3%. This was due to the larger decline in the price of clothing and footwear and a drop in the cost of telecommunication services were offset by an increase in the cost of household durables and a smaller decline in the price of personal care products, according to the joint release.

Accommodation inflation also remained unchanged from August as housing rents saw a similar pace of increase, at 0.4%.

Similarly, food inflation was unchanged as the price of non-cooked food and food services rose by the same pace, at 1.8%.

In the coming quarters, MAS and MTI expects inflation to remain low amidst weak demand in key commodity markets as well as the persistence of negative output gaps in Singapore.

The accumulated slack in the labour market is also forecasted to weigh on wages.

Core inflation is expected to turn mildly positive in 2021, as the disinflationary effects of the government subsidies introduced this year fade, and with demand for domestic services forecasted to gradually pick up.

MAS core inflation is expected to come between 0%-1% in 2021, whilst the CPI All-Items inflation is projected to fall between -0.5% to 0.5% next year.

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