In January 2024, Singapore’s inflation rates unexpectedly eased, with headline inflation falling to 2.9%, a decrease from December’s 3.7%. This decline was noted despite the recent increase in the Goods and Services Tax (GST) to 9%. The Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) reported these figures on February 23, 2024.

Month-on-month data revealed that headline inflation dropped by 0.7% in January, while core inflation, which excludes accommodation and private transport, increased by 0.6% to reach 3.1%. This shift was attributed to lower accommodation and private transport prices, alongside softer inflation rates for services and food.

Chua Han Teng, an economist at DBS, highlighted that January’s inflation rate is the slowest growth recorded since Q3 2021. The MAS and MTI maintained their full-year inflation forecasts, expecting both headline and core inflation to average between 2.5% and 3.5%. When excluding the temporary effects of the GST hike, both inflation metrics are anticipated to range between 1.5% and 2.5%.

While the authorities expect core inflation to rise in February due to price pressures around the Chinese New Year, they believe that manageable global commodity prices and a strong Singapore dollar will help keep core inflation lower throughout 2024. Barclays economist Brian Tan has adjusted his 2024 forecasts, projecting core inflation at 3% and headline inflation at 2.2%, both lower than earlier estimates.

Despite these positive developments, economists are cautious. DBS and UOB retained their full-year inflation forecasts, with DBS maintaining a core inflation expectation of 3.1% and UOB projecting headline inflation at 3.5%. Meanwhile, Barclays anticipates that the MAS will keep its monetary policy unchanged until 2025 but sees potential for tightening measures if inflation pressures persist.

Examining specific consumer price index categories, accommodation inflation decreased significantly to 2.1% from 4.1%, thanks to service rebates provided as part of the Cost-of-Living Support Package. Private transport inflation fell to 2.9% from 5%, reflecting slower growth in car prices. Additionally, services inflation slightly decreased to 3.3%, driven by smaller increases in holiday expenses and lower airfares.

Food inflation moderated to 3.3%, down from 3.7%, with slower price increases for both cooked and non-cooked food. Conversely, retail and other goods inflation rose to 1.4%, attributed to higher prices for clothing, footwear, and health products. Electricity and gas inflation surged to 5.3%, up from 1.3%, following significant increases in tariffs.

Overall, January’s inflation report signals a complex economic landscape for Singapore, with ongoing adjustments to GST and various market factors influencing consumer prices.