Inflation Rising

Source : TODAY, Friday, August 24, 2007

It increased at the fastest pace in 12 years last month

If it seemed to you that seeing the doctor or eating out is becoming more expensive of late, you were spot on.

Inflation rose at the fastest pace in 12 years last month — as the Goods and Services Tax (GST) hike kicked in, food costs rose and rents soared.

The Consumer Price Index (CPI) rose 2.6 per cent from a year earlier after rising 1.3 per cent in June, the Department of Statistics said yesterday. The rise was the fastest since January 1995.

Compared to a year ago, gains were the sharpest for healthcare, as more expensive Chinese herbs and higher medical consultation fees pushed the category up by 5.7 per cent.

Food, which has the largest weightage in the CPI, increased 2.9 per cent from a year ago, as the costs of cooked food, fruits, fish and milk powder went up — the last due to higher global prices.

July also marked the first month the surge in real estate prices finally hit headline inflation. While housing prices went up by 0.7 per cent from a year ago, it crept up by 4.9 per cent compared to June as electricity prices climbed and rents increased.

Public housing rents — which hit a 10-year high last month — is included in the CPI’s housing component, unlike private rents.

The Monetary Authority of Singapore expects inflation this year to be at the upper half of its 0.5- to 1.5-per-cent range, before rising to about 2 per cent next year.
But private-sector economists expect full-year inflation to exceed 1.5 per cent this year. UOB economist Alvin Liew, whose forecast is 1.8 per cent, said the impact of the GST hike would be “felt for the next 11 months”.

Also, bad weather in the region has led to supply disruptions that may continue to bolster food costs, CIMB-GK economist Song Seng Wun told Dow Jones Newswires.