Transport costs keep inflation elevated despite stable headline rate

May inflation was unchanged at 1.8%.

Singapore’s inflation picture in May was driven mainly by higher private transport and healthcare costs, even as overall price growth remained contained, according to official data and economists.

The Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry said headline inflation was 1.8% year on year (YoY) in May, unchanged from April whilst core inflation held at 1.4% for a third straight month.

The stable headline reading masked divergence across categories, with private transport remaining the main source of upward pressure.

Certificate of Entitlement premiums stayed elevated, with Category B reaching about $129,000 in recent bidding rounds, based on market data cited by analysts. Fuel costs also continued to feed into transport inflation.

Zavier Wong, market analyst at eToro, said both fuel and vehicle costs were shaping transport inflation.

He said earlier fuel price increases reflected geopolitical disruptions that lifted global oil prices, whilst COE premiums remained high due to strong private-hire demand and limited supply growth.

Wong added that healthcare costs also remained elevated, supported by higher insurance premiums and broader medical inflation.

Health insurance inflation rose 8.6% YoY, driven by phased MediShield Life premium increases and rising healthcare demand linked to ageing and chronic conditions.

Nomura said core inflation in May came in below expectations at 1.4%. It pointed to softer contributions from food, airfares, and selected imported goods, even as energy and freight costs stayed elevated.

Japan’s largest investment bank said earlier energy price increases are still expected to filter through transport and services with a lag, shaping inflation trends later in the year.

MAS tightened policy in April by raising the rate of appreciation of the S$NEER band. Economists said the July review will be closely watched for signals on whether inflation risks remain tilted higher.

CGS International Securities said underlying inflation remained broadly stable, with higher transport costs offset by softer price pressures in other parts of the basket.

Forecasts remain split. Nomura expects inflation to edge higher later in the year as energy costs continue to pass through the economy. CGS International expects easing oil prices to help cap headline inflation, even as transport costs remain elevated.