SINGAPORE - Singapore's
inflation rate last month - driven by higher housing, transport and
food costs - hit 5.2 per cent compared to a year ago - the highest
level in five months since it peaked at 5.5 per cent in
January.
However, data released yesterday showed that the pinch of higher
prices was not felt uniformly across all income groups.
According to figures released by the Department of Statistics
(DOS), in the first six months of the year, the consumer price
index (CPI) for general households rose 5.0 per cent from last
year. However, the top 20 per cent of earners in Singapore felt the
higher prices more acutely, facing an inflation rate of 5.6 per
cent.
This was due to significant price increases for cars and petrol,
which have relatively larger weights for this group.
In contrast, those among the lowest 20 per cent of income earners
grappled with an inflation rate of 3.9 per cent, while the middle
60 per cent of income-earners saw inflation of 4.7 per cent.
According to the DOS, all three groups were affected by higher car
prices, accommodation costs and more expensive food. These
increases were, however, moderated - particularly for lower
income-earners - by the Government's scrapping of television and
radio licence fees and lower service and conservancy charges.
Against this backdrop and with an eye on higher inflation in the
months ahead, the Monetary Authority of Singapore (MAS) last week
raised its official inflation forecast for the full year to between
4 and 5 per cent.
Analysts MediaCorp spoke to did not expect headline inflation to
moderate until at least the end of the year.
"They are going to be (on) the firmer side of 4.5 per cent or
perhaps even 5 per cent for a couple of months," said Mr Vishnu
Varathan, Asia economist at Capital Economics. "This is primarily
driven by higher housing as well as transport costs."
Experts also noted that, although low income-earners faced the
lowest inflation rates, this was still significant for them due to
their low earnings base.
Higher accommodation costs and electricity tariffs drove up housing
cost last month by 8.8 per cent from last year, while food items
last month cost 3.1 per cent more than a year ago.
The cost of transport increased 10.4 per cent, arising from higher
prices of cars and petrol, with the higher car prices partially
reflecting the lower base effect as car prices dropped in June last
year over May last year.
Excluding accommodation costs, the CPI rose 4.0 per cent in June
from last year.
On a year-on-year basis, the MAS core inflation measure - which
excludes the costs of accommodation and private road transport -
was 2.3 per cent.
While the MAS said last week that monetary tightening has helped
dampen cost increases, with the strong Singapore dollar helping to
filter cost increases and restrain growth, higher uncertainties in
the global economy could scale back the pace of tightening.
The Singapore dollar strengthened to yet another record high of
S$1.2064 versus the US dollar late yesterday, compared to S$1.2080
on Friday.
Noting inflation has remained high in the region as well, DBS
senior economist Irvin Seah felt monetary tightening was shifting
to a lower gear and central banks were beginning to be more
cautious.
"So most of the central banks, although we still expect them to
continue to hike interest rates ... I think the pace of increase in
policy rates are likely to be slower going forward," he
said.
http://www.todayonline.com/Singapore/EDC110726-0000080/Inflation-hits-top-earners-hardest
