Lower income groups hit by inflation

New Government figures revealed 20 percent of Singapore’s poorest were hit twice by inflation on the first half of this year than more fortunate households.

Largely because of increasing housing and food prices, 1.6 percent inflation during the first half were experienced by the low-income group, compared to 0.7 percent for the middle 60 percent and 0.9 percent for the top 20 percent of households.

But these price increases are well lower on the levels depicted a year ago.

The Department of Statistics said yesterday that the average household experienced an overall 0.8 percent inflation rate during the first six months of the year, in comparison with the last year’s 7.1 percent in the same period.

The rise in inflation rate experienced by the lower paid is largely because of the high prices of basic commodities like power, transport, housing and food.

The consumer price index (CPI) in July, which is the main inflation measurement, was down 0.5 percent a year ago during the same month because of lower housing, recreation and transport costs.

Comparing July 2009 on July 2008, 1.3 percent drop on housing costs was seen largely due to cheaper electricity while 3 percent drop on communications and transport costs was seen mainly because of lower price of petroleum. Recreation also dropped by 0.9 percent mainly due to lower costs of holiday travel.

The mild year-on-year fall on prices are anticipated by economists to change positive soon.

CIMB-GK is anticipating mild deflation for this year’s remaining months; its economist Mr. Song Seng Wun also stated that the decline rates are beginning to slow in spite of the fact that prices are still falling year-on-year.

After the seasonal effects are stripped out, the CPI was up in July compared to June with 0.3 percent, after increasing in June for about 0.2 percent and in May for 0.8 percent.

This was mainly because of the 1.4 percent price increase in housing costs as affected by higher electricity tariffs, including the charges on service and conservancy. Rebates were yielded in June and not in July.

Food prices also dipped 0.1 percent in July over the average in June, while a price increase of 0.7 percent was seen in transport and communications, according to CIMB-GK.

Singapore’s Standard Chartered Bank economist Mr. Alvin Liew said the data indicated that there might be price pressure developing even as the year-on-year figures might still be negative towards a few months or more.

Chow Penn Nee, an economist of UOB Economic Research said that price increases seem to be increasing faster than expected.

'The CPI will probably register monthly increases throughout the year, with economic indicators gradually improving, and crude oil price and accommodation costs also rising in tandem.'