Every month, the Monetary Authority of Singapore (MAS) releases figures on the latest consumer price developments in Singapore. This gives us a snapshot of the inflation rate during the month and a summary of how each cost area is changing.
While this is termed the Consumer Price Index (CPI), and indicates how prices are changing for consumers. It is also a good gauge for how businesses are affected. The main cost components included are:
Electricity, LPG and gas
Retail and other goods
While accommodation will be least impactful on businesses in the short term, the effects of the other components may be felt almost immediately.
Here are 6 things that businesses should know from the August 2021 Consumer Price Developments.
#1 MAS Core Inflation Increases 1.1% In August 2021
In the past 30 years, the MAS Core Inflation rate has grown about 1.6% on average. In 2020, on the back of COVID-19 and the worst economic recession in Singapore’s history, the MAS Core Inflation rate was -0.2%.
This meant that there was a deflation last year. In general, deflation is a sign of a weak or weakening economy.
In the August 2021 Consumer Price Development report , the MAS Core Inflation was 1.1%. This looks to be a healthy rebound getting us nearer the normal inflation level.
#2 Electricity & Gas Costs Rose Close To 10%
This statistic can be a little bit surprising as we would not expect such a steep increase in electricity and gas prices.
However, the likely reason for this is that prices are now normalising after consumers (and businesses) benefited from lower prices when the Open Electricity Market (OEM) was introduced.
A quick check on how prices changed in the past confirmed this. In 2020, electricity prices dipped 9.2%, while gas prices 4.7%.
#3 Ongoing Weakness In Retail Sector
The only broad category of deflation was in the prices of Retail and Other Goods. Nevertheless, the report highlighted that the fall is less steep – pointing to pockets of higher inflation some areas such as personal care products.
Even though the deflation is slowing down for Retail & Other Goods, another reason could be the fact that people are increasingly going online to purchase. Going online to purchase also means competition with global players compared to just local retailers.
#4 Food Prices Are On The Up
In 2020, food prices rose about 2% on average. This is despite Singapore experiencing its worst economic recession and its first deflation in close to 20 years. The reason is quite logical as well, as food supply chains have been disrupted by COVID-19.
In August this year, food prices continue to see an uptick. This is for both non-cooked food (i.e. groceries) and prepared meals (i.e. restaurants, hawker food, fast food…).
Businesses in the F&B sector can expect to see raw material prices going up. Passing on this cost to consumers may also see tougher business – as the median salary in Singapore fell for the first time in 15 years in 2020.
#5 Wages Increases To Be Restrained In 2021
As mentioned above, the median salary dipped for the first time in 15 years in 2020. It took a global pandemic to for this to happen. However, the recovery may take a while as the MAS report suggested that there is a slack in the local jobs market that will take some time to be absorbed.
This can be seen in the latest Labour Market Report 2Q 2021. Citizen unemployment saw an increase after 8 consecutive months of recovery – to 3.9% as of July 2021.
#6 Commercial Rents To Remain Muted
Singapore has been hit with multiple false starts to re-opening the economy. As such, the report also mentions that commercial rents are projected to stay low. This should cap business costs.
The government has already announced measures to support tenants with the Rental Support Scheme (RSS) for two separate periods of Phase 2 (Heightened Alert) measures. Commercial landlords are also expected to support SME tenants with two weeks’ worth of rental support.
The post 6 Takeaways From The MAS Consumer Price Developments August 2021 Report appeared first on DollarsAndSense Business.