Inflation dips close to year's low

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#1
Essentially, if you don't own a car or intend to buy one and dont rent an apartment, inflation should be much lower for you than the headline number. Smile

The Straits Times
www.straitstimes.com
Published on Nov 24, 2012
Inflation dips close to year's low

Rise in price index eases to 4% in Oct, but reprieve may be shortlived

By melissa tan

INFLATION eased unexpectedly last month, dropping to nearly its lowest level so far this year, as the pace of price increases for cars and accommodation slowed.

The consumer price index (CPI), the main gauge of inflation, rose 4 per cent year-on-year last month, the Department of Statistics said yesterday. This represented a significant drop from the 4.7 per cent seen in September.

Last month's reading was close to the lowest rate seen to date this year - the 3.9 per cent posted in August. It surprised market watchers, who had tipped inflation to reach 4.5 per cent.

However, Bank of America Merrill Lynch economist Chua Hak Bin said the reprieve was unlikely to last, pointing to record-high car prices this month, a tight supply of HDB flats for rent and a manpower crunch.

Private road transport costs rose 8.3 per cent last month from levels a year ago - a moderation from the 10.8 per cent seen in September - because of lower certificate of entitlement (COE) premiums in September.

Accommodation costs were also lower last month, coming in at 6.8 per cent, compared with 7.7 per cent in September.

However, this decline was due largely to "base effects", said the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) in a joint statement yesterday.

They noted that some tenants received rental rebates in September last year, but none was given out in September this year. By comparison, "this base effect was not present in October 2012".

Stripping out cars and accommodation, core inflation fell to 2.2 per cent last month from 2.4 per cent in September. Stronger services inflation was more than offset by lower contributions from food and oil-related items, MAS and MTI noted.

Food inflation dipped to 1.7 per cent last month from 2.1 per cent in September, though MAS and MTI cautioned that global food prices could rise over the next few months and into the early part of next year, owing to weather-related supply disruptions.

Core inflation here is expected to average around 2.5 per cent this year and 2 per cent to 3 per cent next year, with "persistent tightness" in the labour market supporting slightly stronger wage increases next year that will continue to be passed through to consumer prices, MAS and MTI said.

Analysts said that given the elevated inflation levels, the focus was likely to remain on inflation rather than growth in the early part of next year. "The Budget is likely to maintain a mild contractionary stance and stay focused on restructuring," said Citi economist Kit Wei Zheng.

Overall inflation is tipped to come in slightly above 4.5 per cent this year and ease to between 3.5 per cent and 4.5 per cent next year.

melissat@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#2
When i check the MAS CPI, housing has 25% weights.

Even if property price doubled within a year, is it still limited to 1/4 effects ?
Wouldn't it makes more sense that we total up all expenses increase to compare YoY as inflation measure instead ?

Just my Diary
corylogics.blogspot.com/


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#3
(26-11-2012, 02:02 PM)corydorus Wrote: When i check the MAS CPI, housing has 25% weights.

Even if property price doubled within a year, is it still limited to 1/4 effects ?
Wouldn't it makes more sense that we total up all expenses increase to compare YoY as inflation measure instead ?

if typical housing expense ratio is 25% among general majority, then the effect of 1/4 when property price doubled is right, isn't it?

I suppose the CPI provides the comparison suggested, but normalized it as 10,000 in "All items". Tongue
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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#4
If the property price doubled, why would 25% of general majority expense still be valid ?

Just my Diary
corylogics.blogspot.com/


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#5
(26-11-2012, 04:14 PM)corydorus Wrote: If the property price doubled, why would 25% of general majority expense still be valid ?

My point is if ratio of housing expense is 25% of total, when housing expense double, the total expense is increase by 1/4, isn't it right?
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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