Chart of the Day: Measures to curb household debt and healthcare costs taking toll on Singapore’s inflation

As forecasts have been lowered from as high as 2.8% to 1.1%.

Inflation forecasts for 2014 and 2015 have been lowered to 1.1% and 1.7% respectively. This is down from previous forecasts of 1.5% and 2.8%.

According to DBS, essentially, macro-prudential measures introduced to curb household leverages and policies to defray healthcare costs are having bigger than expected impact on the headline CPI numbers. The falling energy prices have also further weighed down on inflation.

Inflation has been falling for the past five months, from 2.7% YoY in May to the most recent 0.1% for October. The moderation is largely driven by decline in housing and transport inflation as well as moderation in healthcare costs. The slew of property market cooling measures has stifled real estate transactions, leading to declines in property prices. As a result, housing inflation has been stuck in the negative zone for the last 3 months. The last time Singapore had a decline in housing inflation was back in Mar10.

Here’s more from DBS:

In addition, transport inflation has been falling for the last four months. Curbs on car loans introduced early last year to suppressed demand for cars and household leverages as well as higher COE quota have led to declines in the COE premiums. Lower fuel prices in recent months have further weighed down on transport inflation.

Lastly, the Pioneer Package introduced by the government to alleviate the burden of healthcare costs for the elderly has lowered healthcare inflation. The sub-index has eased from an average increase of 3.5% YoY between Jan-Aug14 to just 1.9% over the past two months. Such policy effect is expected to last for twelve months and as such, healthcare inflation will likely average about 1.8-2.0% till August next year.

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