Singapore’s core inflation stayed in the red for the fifth straight month in June. 

The price gauge, which registers the inflation levels excluding accommodation and private transport costs came in at -0.2% year-on-year, unchanged from May, according to the consumer price index (CPI) released by the Department of Statistics on July 23.

Meanwhile, headline inflation – the measures the total inflation in the economy – came in at -0.5%, making June the metric’s third month in the red. However, the decline narrowed from May’s -0.8% thanks to lower private transport costs.

The sector contracted -4.4%, from the -6.8% logged in May, following smaller declines in car and petrol prices.

In the same vein, the cost of retail and other goods fell -1.8% from May’s -2.3%. This comes from the gradual decline in the prices of clothing and telecommunications equipment. The narrower fall can also be attributed to the start of phase two of Singapore’s re-opening on June 19, which allowed consumers to make in-shop purchases.

Meanwhile, electricity and gas costs were down 3.9%. While an improvement from the -4.6% posted in May, June’s decline follows a slower take-up of new subscriptions under the Open Electricity Market.

Conversely, services costs dipped -1.0%, widening from the -0.8% logged in May. This follows a decline in holiday expenses and airfares, possibly as it became clear that recreational travel may not be possible in 2020.

The Ministry of Trade and Industry (MTI) and Monetary Authority of Singapore (MAS) say the change in prices for these components were calculated using the overall change in the CPI-All Items, in line with international guidelines, as prices were not available in June owing to the nationwide lockdowns across the globe.

Accommodation costs meanwhile came in flat at 0.5% as housing rents increased at a steady pace.

The cost of food bucked the trend, increasing 2.3%, from May’s 2.2% following larger increases in the prices of non-cooked food.

Looking ahead, the MAS and MTI expect inflation to remain subdued at its previously forecast range of -1% and 0% in 2020. 

This is due to the lower oil prices that are expected to weigh on the prices of the energy-related components in the metric, the authorities note.

Aside from this, international measures to contain the Covid-19 outbreak have led to supply chain disruptions, which could put some upward pressure on imported food prices, they add.

On a domestic front, they expect cost pressures to remain low, as “weak labour market conditions will dampen consumer demand, thereby capping price increases for discretionary goods and services”.

"Cost pressures are likely to remain low as some degree of spare capacity in the economy emerges," the authorities stress.

To OCBC’s chief economist Selena Ling there are “no surprises” in the latest numbers. “2020 is likely to remain mired in mild deflationary pressures due to the long tail nature of the global Covid-19 pandemic and the subdued demand story”.

Maybank economists Chua Hak Bin and Lee Ju Ye say “it is still not clear that inflation has bottomed out”.

“Consumer spending will not likely return to pre-Covid levels in Phase 2, given a weak labour market and falling wages. This will cap price increases on discretionary goods and services”.

For now, Ling expects the CPI index to only reverse into the green in 2021.