Surging house prices drive Singapore inflation

Price pressure: Workers cleaning the roof of the Esplanade Theatre in Singapore. Economists noted that inflationary pressures in Singapore have begun to emerge in other categories, particularly those that were more labour-intensive. — AP

SINGAPORE: Singapore's inflation accelerated sharply in March, led by a jump in the cost of cars and housing, suggesting the central bank may tighten monetary policy further when it comes up for review in October.

The city-state's consumer price index (CPI) rose 5.2% in March from a year earlier, the government said yesterday, far exceeding February's 4.6% pace and beating the estimates of all 11 economists polled by Reuters.

“Singapore is in danger of losing its low inflation status,” Robert PriorWandesforde of Credit Suisse said in a client note.

“The current episode is the second major' inflation shock Singapore has experienced in the last four years; but what makes this time different from 2008 is that inflation in most other Asian countries remains well contained.”

Headline inflation “could average around 5% year-on-year in the first half before easing gradually in the second half of 2012,” the Ministry of Trade and Industry (MTI) and the Monetary Authority of Singapore (MAS) said in a joint statement.

They said housing would remain the largest contributor to inflation this year as rental contracts were renewed at “considerably higher” levels, especially in government-built HDB apartments, which tend to be rented out to people on lower incomes.

Housing, which rose 9.1% from a year earlier, and transport, which rose 8.6%, were the biggest contributors to inflation in March, data from MTI showed.

Economists noted that inflationary pressures in Singapore had begun to emerge in other categories, particularly those that were more labour-intensive.

“If we do see stronger price pressures, especially from healthcare and education, hinting at greater pass-through of wage costs, then the chances are (MAS) might do something else in October,” said Barclays economist Joey Chew.

The central bank surprised financial markets with its half-year monetary policy statement this month by saying it would let the Singapore dollar appreciate at a slightly faster pace because of persistent inflationary pressures.

By Reuters