Singapore’s Consumer-Price Decline Eases as Economy Recovers
Singapore’s consumer prices fell the least in eight months in November as food and transport costs climbed amid an economic recovery.
The consumer price index slid 0.2 percent from a year earlier, after falling 0.8 percent in October, the Department of Statistics said in a statement in Singapore today. The median forecast of six economists surveyed by Bloomberg News was for a 0.4 percent drop. Prices rose 0.4 percent from October, without adjusting for seasonal factors.
Rising commodity and food prices, coupled with an improving global economy, have sparked concerns that inflation will accelerate and derail Asia’s recovery. That’s prompted policy makers in Australia, Vietnam and India to start raising interest rates or signal they may remove monetary stimulus soon.
“As the economy is expected to continue its recovery, the outlook is for a moderate positive trend in inflation into next year,” said David Cohen, an economist with Action Economics in Singapore.
Singapore’s gross domestic product climbed an annualized 14.2 percent last quarter from the previous three months, the second consecutive expansion as the island exited the deepest recession since independence in 1965.
The central bank, which uses its currency rather than interest rates to manage price gains, forecasts inflation will be about zero this year. It said in October it will maintain a no-appreciation stance in its exchange rate policy, refraining from further monetary easing after opting for a de-facto devaluation of the Singapore dollar in April to counter collapsing exports.
Policy Changes
The Singapore dollar has gained about 3.2 percent in the past six months against the U.S. currency. It fell 0.5 percent to S$1.4119 against the U.S. dollar as at 12:55 p.m. local time.
Australia and Vietnam raised interest rates this quarter to contain inflation. In India, where wholesale food prices are rising at the fastest pace in 11 years, central bank Governor Duvvuri Subbarao said this month that monetary policy, while an “ineffective instrument” to rein in food costs, may be needed to damp inflation expectations.
Bank of Korea Governor Lee Seong Tae said this month the central bank shouldn’t wait too long before gradually raising interest rates, held at a record-low 2 percent since February.
Food prices, which make up 23 percent of Singapore’s consumer price index, rose 0.7 percent in November from a year earlier, after climbing 0.8 percent the previous month. Transport and communications costs climbed 2.4 percent, while housing prices slid 4.6 percent.
Consumer prices will probably rise 0.3 percent in 2009 and 2.8 percent next year, according to the median forecast in a quarterly survey of economists by the Monetary Authority of Singapore released Dec. 9. The central bank forecasts inflation will average 2.5 percent to 3.5 percent in 2010.
“We expect inflation to return modestly by year end and for it to continue climbing in the first quarter next year,” said Matt Hildebrandt, an economist at JPMorgan Chase & Co. in Singapore.