Consumer Price Development (July 2019)

Consumer Price Index or CPI for short is designed to measure the average price changes in a fixed basket of goods and services commonly purchased by resident households over time. The CPI is a monthly data release that is reported over last year’s data point. There are a few types of CPI data that the Monetary Authority of Singapore releases.

In order to know how to start investing in Singapore for beginners, it helps to be able to be able to see beyond the media dataprints and understand the potential implications on your investments. 

The few types of CPI datas are CPI-All items, CPI less imputed rentals and MAS Core Inflation. The CPI all Items is the most common measure of consumer price changes. However, it includes the cost of housing rental in Singapore and thus CPI-all items is not a good measure of living standards in Singapore. To exclude the effects of housing, MAS releases a CPI less inputed rentals.

CPI less inputed rentals while less volatile, still includes transportation cost that are directly correlated with governmental policies regarding COE. Hence, MAS in looking at the Inflationary pressures of Singapore, look at both the CPI-All Items, also known as the Headline CPI, as well as the MAS Core inflation number.

In July, CPI-All Items inflation came in lower at 0.4% year over year, which was slightly lower than the 0.6% in the previous months. MAS core inflation also came in weaker at 0.8% compared to 1.2% in the previous months.

One of the largest contributors to the drop was in the cost of electricity and gas, which droped by 7% y-o-y. This is a result of the Open Electricity Market in Singapore. While this is generally a positive thing for households as electricity is by and large a fixed expenditure for many Singaporeans, it remains to be seen if the small retail market can accomodate so many electricity retailers.

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