Singapore inflation hits highest in nearly two years, but undershoots expectations

Inflation rises to near two-year high, misses forecasts

Singapore's consumer prices rose 2.2% in July from a year earlier, reaching the highest level in nearly two years, but the increase fell short of expectations. Economists polled by Reuters had projected a 2.3% rise, while June's inflation stood at 1.9%. On a monthly basis, the consumer price index declined 0.2%.

The data, released in a joint statement by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI), showed core inflation, which excludes private transport and accommodation, also rose to 2% year-on-year in July, up from 1.6% in June. That was below the median forecast of 2.2% in the Reuters poll. Core prices increased 0.3% month-on-month.

Overall inflation was driven by higher accommodation costs alongside the rise in core inflation, according to MAS and MTI. In June, overall inflation had been 1.9%.

Sectoral breakdown

Electricity and gas inflation reversed a 2.9% decline in June to rise 8.7% in July, mainly due to a sharp increase in electricity prices, the authorities said. Services inflation rose to 1.7% from 1.5% as airfares and point-to-point transport services prices accelerated. Food inflation edged up to 2.2% from 2.1%, with food services and non-cooked food prices rising at a faster pace.

Accommodation inflation picked up due to larger increases in housing rents and maintenance fees, rising to 0.8% from 0.6%. In contrast, private transport inflation slowed as the pace of petrol and diesel price increases moderated, falling to 8% from 8.4%.

Outlook and forecasts

MAS and MTI projected that core and overall inflation would average between 1.5% and 2.5% for the whole of 2026, in line with MAS' full-year forecast. Core inflation is expected to remain elevated into 2027 before moderating more discernibly from the middle of the year, alongside an expected easing in global energy prices.

The authorities said elevated global energy prices have led to increases in Singapore's electricity and gas tariffs, as well as higher transportation fares. Persistently high and volatile global oil prices, coupled with adverse weather conditions, are expected to lower agricultural yields and raise imported food prices. As higher input costs pass through global supply chains, prices of a wider range of imported goods and services are expected to pick up in the quarters ahead.

On the domestic front, unit labour costs in the services sector are likely to rise at a slower pace amid sustained productivity growth and moderating nominal wage growth, while government subsidies will dampen services inflation.

MAS and MTI noted that risks to the inflation outlook remain tilted to the upside. Renewed disruptions in global energy supplies or worse-than-expected weather conditions could raise imported costs by more than anticipated. Inflation could also be more persistent if robust IT investment growth generates stronger demand spillovers globally and in Singapore. Conversely, an unexpected tightening in global financial conditions or a pullback in AI-related investment could lead to a slowdown in economic activity and, in turn, lower inflation.

The inflation figures come as Singapore upgraded its full-year GDP forecast for 2026 to 4.5%-5.5%, up from the previous range of 2%-4%, as reported by CNBC. The same report noted that the MAS had tightened monetary policy in a surprise move in July, warning that imported inflation would rise due to higher fuel and electronic input costs, and that the government had rolled out two support packages totaling about S$2 billion in response to the Iran war, including cash handouts, consumption vouchers, and tax rebates for companies.