Chart of the Day: Analysts see an end to Singapore's record-breaking deflation

Find out why the headline figure will finally turn positive.

Singapore's consumer price index has been in the red for eighteen months, marking the longest stretch of deflation ever recorded in the city-state. However, analysts are convinced that the headline figure will finally tick up in the second half of the year, owing to the low base set in 2015 and the expected recovery in oil prices.

This chart from Natixis shows that both headline and core inflation are expected to end the year in positive territory.

"CPI inflation is expected to return to positive territory from the third quarter onwards on account of a lower base effect and recovery in oil prices,” DBS Vickers said in a report. DBS added that the central bank’s recent decision to ease car loan curbs will further shore up the headline inflation figure.

“The move is expected to increase car purchases and bring about an upward adjustment in Certificate of Entitlement (COE) premiums. That in turn is expected to lift the private transport consumer price index (CPI), given the strong influence of COE premiums on the index. Note private transport CPI accounts for 11.5% of the overall CPI basket. That’s a significant portion and this is likely to have some impact on CPI inflation in the coming months,” DBS said.

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