If you do leave home for food, shopping, or for a holiday, you may have noticed that your wallet seems to be “shrinking”, and money seems to feel tighter, with less surplus to spare.
In May this year, headline inflation was at 5.1% while core inflation for the same month was 4.7%. Consumer prices have been elevated due to global supply chain friction and consumer goods inflation in advanced economies. With countries getting back in action after the height of the Covid-19 pandemic, the rush for labour and goods has driven costs higher, passing these costs down to consumers.
What are the items powering inflation in 2023 and will consumer prices ease further this year?
#1 Holiday Expenses – 9.6%
Holiday expenses rose by 9.6% for January to May this year, compared with the same five months a year ago.
This can be observed by the “revenge travel” trend that’s going around, with many people travelling overseas for the first time since Covid-19 struck. Some have even travelled to more than five countries this year, according to travellers who told the writer, as they clear their rollover leave from the previous years. Demand has also surged for flights even though most airlines have not fully resumed their flight services.
Holiday expenses are expected to cost even more for the rest of the year, compared to last year, especially when the upcoming June and December holiday numbers are added to the basket.
#2 Private Transport – 10.4%
Private transport inflation rose to a slower pace in the month of May than a year ago, at 7.2%. But we note that in April, private transport inflation was at 10.4%, year-on-year.
For the five months Jan to May, private transport costs rose by 10.4%, compared with a year ago.
#3 Shopping: Footwear – 11.3%
Inflation on clothing and footwear items rose by 6% for Jan to May. Clothing prices rose slower, at 4.1% in the same period.
Meanwhile, prices of footwear are higher than a year ago, at an increase of 11.3% for Jan to May.
The possible reason could be that people are leaving their homes more, with some planning to travel overseas or go for outings that require more walking. This contributes to higher demand for better footwear or shoes that are comfortable for walks.
#4 Meat – 12.2%
More than 90% of Singapore’s food is imported, and the country is easily susceptible to price changes from overseas suppliers. That means meat items are not spared.
Meat prices rose 12.2% for the five months Jan to May, compared to the same period a year ago.
However, in May alone, meat prices were 10.6% higher than a year ago, easing from 10.9% in April, indicating a possible step down in prices and in the months to come.
#5 Fish & Seafood – 6.9%
Fish and seafood prices rose by 6.9%, for the five months Jan to May. In May alone, fish and seafood prices rose by 5.3%, easing from 7.3% in April.
Local production meets about 7.5% of the country’s seafood consumption needs. However, with the elevated prices of fish and seafood seen in 2022, it is expected for the prices of this basket of goods to ease in the months ahead, year-on-year.
#6 Food Serving Services – 7.8%
Meanwhile, eating out is also contributing to the squeeze on your wallet.
Restaurant food inflation is at 7.7%, hawker food is up 7.8%, and fast food is 8.8% higher in Jan to May compared to a year ago.
#7 Accommodation – 4.8%
For the months of Jan to May, accommodation prices rose by 4.8%. In April, accommodation inflation was at 4.9%. It eased slightly to 4.7% in May.
This shows a generally flatter trend of prices rising by under 5%, from a year ago. The ramp-up in the supply of housing units available for rental has led to a general stabilisation in prices.
#8 Recreation And Cultural Goods – 2.7%
Recreation and culture goods are up 2.7% for the five months, compared to the same period a year ago. This segment is expected to increase in the second half of this year, after factoring in the recent ticket sales of Taylor Swift and Coldplay 2024 shows.
Recreation and cultural services inflation are also likely to see an uptick. For Jan to May it posted a 4.4% increase. In May alone, inflation for the segment rose by 5.0% year-on-year.
Fans are willing to fork out large amounts to buy the show tickets of their favourite superstars, as seen by the sold-out shows – this surge in demand is also contributing to inflationary pressures.
For example, a Cat 1 ticket for the upcoming Taylor Swift The Eras Tour at the National Stadium in Singapore costs $348, while the cheapest is $88 per ticket (restricted view). The ticket pricing excludes booking fees, which range from $6 to $20, depending on the ticket pricing and type. There are also VIP tickets, priced from $328 to $1,228, where you get to receive exclusive merchandise and great seats for the show.
Will Inflation Ease Further This Year
The MAS has tightened its policy stance five times since October 2021. The moves have eased the momentum of price increases and led to a gradual decline in core and headline inflation rates.
Core inflation for the full year is expected to average between 3.5% and 4.5% for 2023, while headline inflation is forecast to come in at 4.5% to 5.5%.
Global supply chain frictions and consumer goods inflation in advanced economies have continued to ease. Global energy and food commodity prices have also moderated further. As a result, prices of Singapore’s imported goods have continued to decline on year-on-year terms.
That said, MAS Core Inflation is expected to moderate further in H2 2023 as imported costs are reduced and the current tightness in the domestic labour market eases.
With the increase in COE quota and ramp-up in the supply of housing units available for rental, private transport and accommodation inflation are expected to moderate over the course of the year as well.
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