Singapore's core inflation rises to nearly two-year high of 2.2% in August

Singapore's core inflation climbed to 2.2% year-on-year in August, marking the highest level since September 2024, according to data released on Wednesday. This surge was primarily fueled by increased prices for services, retail, and food items, reported the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) in a joint statement.

On a month-to-month basis, core prices, excluding accommodation and private transport, rose by 0.3% in August. Overall inflation, measured by the Consumer Price Index-All Items, climbed to 2.3% in August from 2.2% in July, largely due to the higher core inflation, which outweighed the decline in private transport inflation. Services inflation surged to 2% in August from 1.7% in July, driven by surging airfares and transport services.

Retail and other goods inflation expanded to 1.8% in August from 1.4% in July, mainly due to higher costs in clothing, footwear, and personal care products. Food prices also ticked upward to 2.3% in August from 2.2% in July, as food service inflation rose while the cost of non-cooked food declined. Accommodation prices stayed flat at 0.8%, with rents increasing uniformly in both months.

Electricity and gas prices remained unchanged at 8.7% as they climbed consistently in both months. The authorities attributed the regime electricity tariff increase in the third quarter of 2026 to the surge in global energy prices from April to mid-June 2026. Private transport inflation eased to 7.5% in August from 8% in July, primarily due to a modest rise in car prices.

Elevated global energy costs have resulted in higher electricity and gas tariffs and increased transportation fares in Singapore. Global oil prices are high and volatile, while adverse weather conditions are anticipated to lower agricultural yields and elevate Singapore's imported food prices. Enhanced government subsidies will continue to mitigate services inflation, and MAS and MTI expect core and overall inflation to average 1.5% to 2.5% in 2026, consistent with their forecast range.

Core inflation is projected to stay elevated through 2027 before gradually moderating from mid-2027, as global energy prices are expected to ease. MAS and MTI caution that the outlook for inflation remains increasingly optimistic at this point, citing potential disruptions in global energy supplies or worse-than-anticipated weather conditions that could drive up Singapore's imported costs beyond expectations.

Persistent inflation risks also exist if robust IT investment growth generates stronger global and Singaporean demand, they added. However, downside risks include an unexpected tightening in global financial conditions or a retreat in AI-related investment, which could slow economic activity and exert downward pressure on inflation, according to the authorities.