Singapore’s core inflation is expected to remain subdued in April, according to a report by UOB Global Economics and Markets Research. The upcoming Consumer Price Index (CPI) release on 23 May is projected to show a sequential rise in core inflation by 0.2-0.3% month-on-month, translating to an estimated 0.5% year-on-year, unchanged from the previous month.
The subdued inflation outlook is attributed to several factors. Imported inflation is likely to remain contained due to benign external price pressures, as indicated by UOB’s import-weighted inflation index. Additionally, the Singapore dollar nominal effective exchange rate (S$NEER) has been elevated above the midpoint of the policy band, further tempering inflation pressures.
A notable factor in the inflation forecast is the 10% increase in water prices effective from 1 April 2025, which is expected to contribute to stronger inflation in the utilities and other fuels component. However, electricity tariffs are set to remain unchanged for the second quarter of 2025.
Airfares, which have a 1.29% weight in the CPI basket, are expected to show weaker momentum. This is partly due to discounts offered by a domestic airline carrier, as well as a broader deflationary trend in airfares observed in February and March. This trend is mirrored in the US CPI and is possibly driven by cheaper fuel prices and softer global demand for travel amidst a challenging macroeconomic environment.
The report highlights that the average price of Brent crude oil has declined from S$75 ($75) per barrel in February to S$66 ($66) in April, which may indicate weakened consumer sentiment and reduced travel demand globally.
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