Surprise! Inflation slows
by admin , July 23, 2010, 1620hrs

SINGAPORE (July 23, 2010) - The rise in consumer prices slowed down unexpectedly last month – but observers believe it is just a brief respite as prices in Singapore are expected to soar in tandem with the fast-growing economy.

Consumer price index rose 2.7 per cent in June from a year earlier, down from May's 3.2 per cent expansion, the Department of Statistics said in a statement. The pace was below the 3.5 per cent predicted by a Dow Jones Newswires poll of five economists.

In the first six months of the year CPI inflation was 2 per cent, lower than the government’s full-year inflation forecast of between 2.5 and 3.5 per cent.

Action Economics director David Cohen told Dow Jones: "The global inflation environment has remained benign. Some of the softness in the global commodity market recently has been an outgrowth of the general nervousness in the financial markets on the sustainability of global growth. That might change."

Singapore is tipped to be the world’s fastest growing economy this year, with the government raising its GDP forecast from between 7 and 9 per cent, to 13 and 15 per cent.

In the coming months, inflation figures are likely to be driven higher by car costs, Standard Chartered economist Alvin Liew wrote in a research note.

Said Mr Liew: "Car prices in Singapore have been soaring so far in 2010, and this is largely due to government policy. We would not be surprised if inflation re-accelerates again, and much of the headline inflation should continue to be driven by transport costs in the coming months."