Consumer price index rose 6.7 per cent, with transport and food costing more
ANOTHER month, another record. Last month's figure for inflation was a 26-year high, following on from record months in December and February.
Weeks of reports of rising global prices of food and oil began to bite, hitting Singaporeans hard at the food courts and markets, and on the buses and roads. Higher food and transport costs led to the rise in price levels in March.
Economists say last month's inflation numbers showed that the Singapore central bank had taken the right step recently when it tightened monetary policy.
But they are not convinced it will be enough to curb inflation in the second half of the year.
The consumer price index (CPI) rose by 6.7 per cent in March compared with the same period last year, said the Singapore Department of Statistics (DOS) yesterday.
This is the highest level since March 1982.
Food prices, which comprise 23 per cent of the total index, rose 7.6 per cent as a result of more expensive cooked food, rice, cereals, milk products, fresh vegetables, seafood and poultry.
Higher petrol and car prices and taxi fares drove transport and communication costs up 7.9 per cent. These costs make up 22 per cent of the overall index.
Housing, the next largest component at 21 per cent, rose by 8.1 per cent in March, driven by increases in accommodation costs and electricity tariffs.
Compared with February, the index fell marginally by 0.1 per cent, with food prices and transport and communication 0.2 per cent lower.
Overall, the index for the first quarter of the year was up 6.6 per cent, compared with the same quarter last year.
The Government has forecast full-year inflation in the range of 4.5 to 5.5 per cent this year, well up on last year's 2.1 per cent.
Economists agreed that March's inflation figures were largely in line with expectations and believe that it is a trend that will likely continue in the next few months.
CIMB-GK economist Song Seng Wun said: 'Looking ahead, we expect elevated high food prices to underpin CPI inflation.
'The rising cost of raw materials and shipping may lead to the index staying high for much longer than we anticipated, although the stronger Singapore dollar will likely partly cushion part of the higher prices in coming months.'
Earlier this month, the Monetary Authority of Singapore announced plans to allow an immediate jump in the value of the Sing dollar by moving up the range in which it allowed the local currency to fluctuate.
This takes direct aim at inflation as a strong Sing dollar helps offset costlier imported goods.
However, United Overseas Bank economist Ho Woei Chen was unsure if the one-off move would be enough.
'Inflationary pressure will continue to stem from food, commodity prices as well as higher education fees, medical and road usage costs which will not be alleviated by a firmer Sing dollar,' she said.
Similarly, HSBC economist Robert Prior-Wandesforde does not believe that a stronger Sing dollar will push inflation back to the traditional 1 to 1.5 per cent.
'We estimate that each 1 per cent appreciation of the trade-weighted currency cuts just 0.1 per cent from inflation in the first full year and a further 0.1 per cent in the second,' he said.
However, some experts believe inflation will ease in the second half of the year, due in part to the basis effect brought about by the 2 percentage point hike in the goods and services tax from July last year.
Mr Song said the risk of a United States and global recession could see commodity prices falling sharply in the second half.
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