Inflation cools to 2.9%

The Straits Times - 23 February 2009

Inflation cools to 2.9%
by Robin Chan

SINGAPORE'S inflation eased significantly in January, continuing its downward trend.

The consumer price index (CPI), which tracks prices of a basket of commonly purchased goods, rose 2.9 per cent in January over a year ago, the Department of Statistics reported on Monday.

This is slower than the 4.3 per cent rise in December, and prices have now eased for the fourth straight month since last October.

Compared to December, inflation was down marginally by 0.1 per cent.

Overall, food prices in January rose 6.2 per cent from a year before, while housing costs rose 7.7 per cent. More expensive holiday travel also pushed up the recreation and others category by 3.2 per cent.

Excluding housing, which makes up 21 per cent of the index, CPI only rose 1.5 per cent.

Transport and communication costs were down 5 per cent due to lower pump and car prices.

Economists had forecast CPI to rise 2.4 per cent from the previous year.

Citigroup economist Kit Wei Zheng said that while inflation is slightly higher than expected, he still expects the Monetary Authority of Singapore (MAS) to ease the Singdollar policy further in its upcoming April meeting.

Lower price levels allow the Government to spend aggressively to stimulate the recession-hit economy through public spending and weakening the Singdollar to make exports cheaper, without fear of driving up inflation.

The Government, which announced a $20.5 billion stimulus package in the Budget, expects inflation to hold steady or fall 1 per cent this year as Singapore battles a recession which could send gross domestic product (GDP) down minus 5 per cent this year.