Q3 inflation spike as delayed energy tariffs hit in July, analysts warn

Regulated electricity tariffs and rising petrol prices are set to break inflation calm.

Higher electricity tariffs and petrol prices are expected to feed into Singapore’s inflation from the third quarter, analysts said.

RHB Banking Group said the country’s headline consumer price index (CPI) at 1.8% year-on-year in April came in lower than expected, adding that the impact of higher energy costs from geopolitical tensions is expected to feed through more meaningfully only from the third quarter of 2026 onwards.

The bank said it maintains its 2026 inflation forecasts at 2.5% for headline inflation and 2.0% for core inflation.

“We expect inflationary pressures to build further in the months ahead as disruptions to Middle East oil supplies persist and continue to ripple through global supply chains,” it noted.

“Looking ahead, Singapore may face mounting cost-push pressures as elevated oil prices feed into transportation, utilities, and business operating costs, potentially spilling over into broader consumer inflation,” RHB added.

It added that electricity and gas prices fell at a slower pace in April due to lagged tariff adjustments based on earlier fuel costs.

“Given Singapore’s import-dependent structure, CPI is most sensitive to oil price movements through transport, housing & utilities, and food, all of which are heavily exposed to global energy and logistics costs,” it added.

The Monetary Authority of Singapore (MAS) has indicated that higher global energy prices in April to May will only be reflected in regulated electricity tariffs from the third quarter of 2026, starting July, the report noted.

RHB said private transport inflation rose 8.1% year-on-year in April, driven by higher petrol and car prices.

Petrol prices in Singapore have trended higher, citing levels of around $3.46 per litre for 95-octane and about $3.97 to $3.98 per litre for 98-octane before discounts amid geopolitical tensions, it noted.

RHB said sustained high oil prices could intensify cost-push inflation and affect consumer spending in the second half of 2026.

United Overseas Bank (UOB) said Singapore’s core CPI rose 1.4%year-on-year in April, softer than its forecast and market expectations, and down from 1.7% in March.

It noted that the decline was driven by sequential price contractions in information and communications services and in telecommunications services, as well as lower clothing and footwear prices.

Airfares also rose modestly in April despite higher jet fuel costs, which it attributed to fuel cost hedging and delayed pass-through to consumers.

Additionally, healthcare inflation eased to 3.1% year-on-year from 4.0% in March, reflecting lower growth in health insurance premiums.

UOB said headline inflation was stable at 1.8% year-on-year, supported by higher private transport inflation of 8.1%, driven by petrol and car prices, offset by softer core and accommodation inflation.

It said it sees early signs of imported inflation pressures and broadening price increases, citing its import-weighted inflation index and a rise in inflation pervasiveness.

UOB said the MAS maintained its 2026 headline and core inflation forecast range of 1.5 to 2.5%, with risks still tilted to the upside.

It added that the regulator noted domestic consumer spending could turn more cautious, whilst supply chain disruptions and tighter global financial conditions could weigh on activity and inflation.

UOB said MAS expects services unit labour costs to rise more slowly, with a contraction in 1Q26, reflecting easing wage growth and productivity gains.

MAS said inflation risks remain tilted to the upside due to potential disruptions in global energy supplies and intermediate inputs that could raise import costs.

Downside risks include weaker industrial production from supply chain disruptions or tighter global financial conditions that could dampen activity and ease inflation pressures.

Zavier Wong, market analyst at eToro, said April’s core inflation reading of 1.4% was a mild surprise to the downside, reversing two consecutive months of increases.

Wong said the softer reading was driven largely by a pullback in health insurance costs and lower telecommunications prices, which he described as relatively one-off factors.

"That being said, disruption to the Strait of Hormuz has kept oil prices at elevated levels through much of the March-April window, and those input costs take time to travel through global supply chains before landing in Singapore’s import basket," he said.

Services inflation and retail price moderation suggested households are also becoming more cautious, but said this could be tested again later in the year as cost pressures continue to work through the economy, Wong said.

He added that recent easing in oil prices amidst progress in peace talks could provide some imported cost relief in the second half of the year, but cautioned that geopolitical developments remain uncertain and market reactions can be volatile.