Singapore dives more deeply into deflation in May

June 24, 2016

SINGAPORE – The headline CPI here dived deeper into negative territory during May in a significant shock relative to consensus.  The headline CPI fell by -0.7%m/m (nsa) compared to a consensus estimate for no change in the index. This saw deflation triple from -0.5%y/y in April to -1.6%y/y in May.

But despite the headline shock, ANZ Bank says core inflation remains relatively ‘sticky’, although it also came in slightly lower than market expectations
The bank says that private transport costs were 7.6% lower than a year ago (compared to 7.1% lower in May) due to the base effect of higher fuel prices last year.
Disinflation is most pronounced in accommodation costs with supply side restructuring of the economy continuing to create an overhang in certain segments of the rental market.
ANZ said the failure of core headline inflation to snap back as base effects fall out of the annual arithmetic will significantly raise its concern on the core inflation outlook.  www.live.anz.com (ATI).