Singapore Inflation Rate 2024—What Is It and Why Does It Matter?

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Image: iStock / Annika McFarlane

OK, confession time. Even though I know that Inflation is Very Bad and I should do all I can to stay ahead of it, I must confess I haven’t a clue what the Singapore inflation rate actually is or means for me.

The thing is, knowing the inflation rate (even if just a ballpark figure) is crucial for all kinds of personal finance planning. Like knowing what counts as a good return on your investments, projecting how much money you’ll need to retire and even budgeting for the day-to-day stuff.

So I finally decided to get a hold of understanding inflation. In this article, I’m going to break down for you exactly what the Singapore inflation rate is, and what inflation really means.

Singapore inflation rate 2024: What it is and why it matters?

      1. What’s the meaning of inflation?
      2. Singapore inflation rate for 2024
      3. Is inflation rising in Singapore?
      4. Which consumer goods inflate quicker than others?
      5. How does the inflation rate affect all of us?
      6. What can Singaporeans do to combat inflation then?

 

1. What’s the meaning of inflation?

We throw the word around a lot, but what exactly is inflation? Most Singaporeans already have an intuitive grasp of the concept. Just look at how outraged we are when the price of kopi goes up from $1 to $1.20.

But that’s just one item. Inflation covers a lot more than your morning brew. It refers to the price increase of a standardised basket of goods—i.e. not just food and drinks, but also housing, transport, healthcare, education and even recreation.

This is compiled by the Department of Statistics every month and is published officially as the Consumer Price Index, or CPI.

And no, they don’t just record the cheapest housebrand product at NTUC FairPrice. The total basket of goods comprises 6,800 brands/varieties of items, and prices are surveyed at 4,200 outlets across Singapore. 

The Consumer Price Index is published every month, and each month’s CPI is benchmarked against the same statistic a year ago. For example, the CPI for September 2023 is measured against that of September 2022. 

The difference between this year’s and last year’s CPI = annual inflation rate in Singapore.

Seems simple enough, right? Well, there’s a bit more to this story. 

MAS actually looks more closely at what they call core inflation measure, which is a variant of the regular inflation rate, except minus accommodation costs (i.e. rental) and private transport costs (i.e. car). Since the majority of Singaporeans own their homes and take public transport, core inflation measure offers a better gauge of price increases that the average Singaporean is affected by on a daily basis.

 

2. Singapore inflation rate for 2024

Since the CPI is measured and published monthly, the annual Singapore inflation rate varies from month to month. 

Bear in mind that there’s a seasonal effects—for example, if there’s a drought in Australia, then some of the dairy and produce that make up the CPI will be a lot more expensive, making this month’s inflation rate disproportionately high.

Or, closer to home, inflation was expected to increase in Feb 2024 (spoiler: it did) due to anticipated Chinese New Year spending.

Let’s look at all the recorded core inflation rates for the past 6 months.

Month Singapore inflation rate (all items in CPI) Core inflation measure (not counting rent / cars)
Sep 2023 4.1% 3.0%
Oct 2023 4.7% 3.3%
Nov 2023 3.6% 3.2%
Dec 2023 3.7% 3.3%
Jan 2024 2.9% 3.1%
Feb 2024  3.4% 3.6%

Source: MAS

Note: Inflation rates here are year-on-year rates. For example, Jan 2024’s inflation rate of 0.4% means the CPI was 0.4% more expensive compared to Jan 2023.

Are you an inflation nerd and want to find out more historical prices? Check out the MAS’s inflation calculator.

 

3. Is inflation rising in Singapore?

Well, it was. Here’s a look at Singapore’s inflation rate from 1987 to now:

Statistic: Singapore: Inflation rate from 1987 to 2028* (compared to the previous year) | Statista
As you can see from the graph above, inflation was well over 6% in 2008 and 2022. And these increases were very sharp. For example, the inflation rate in 2007 was just 2.11% before it spiked to 6.63% the following year! Crazy, right?

But we can explain why we saw these spikes. The 2008 rise was spurred by increasing global commodity prices, a result of robust worldwide economic activity. Additionally, a 2%-point increase in the GST in mid-2007 contributed temporarily to inflation.

In 2022, the world was no longer reeling from the COVID-19 pandemic. People were coming out of their holes ready to spend money that they had accumulated during lockdown, when they couldn’t spend on non-essential things like dining out and travel. And what do you get when so much pent-up demand is unleashed? Demand-pull inflation—i.e. businesses can increase their prices to meet the increase in demand.

At the same time that demand was booming, supply could not keep up. We still had occasional COVID-19 spikes, and restrictions had to be reimposed here and there to control these. With operations disrupted, the pace of the production of goods and services was insufficient to meet demand.

So that was the last really crazy inflation peak we had. Since the high of 6.12% in 2022, inflation has dropped to 5.47% in 2023, and then fell further to 4.8% in 2023. As of Feb 2024, it’s at 3.4% and is projected to continue decreasing barring any unforeseen global crises.

So is inflation increasing in Singapore? According to the numbers, no.

But ask any person on the street, and they’ll say that everything is getting more expensive. From private transport and food down to rent and clothes, prices are getting less wallet-friendly everyday. So, what gives?

Now that we know the numbers, let’s make better sense of them. What do these inflation rates mean for you, the average Joe and normal Nancy? Let’s take a look at inflation in the various categories to get a better understanding of its direct impact on your life. 

 

4. Which consumer goods inflate quicker than others?

The sneaky thing about inflation is that it’s really uneven, so what we experience in reality can feel more like an unconnected series of flukes, rather than the steady evaporation of our hard-earned money it actually is.

In 2012, Singapore’s (all-items) inflation rate hit a high 4.6%—the third highest reading since 1991 largely due to skyrocketing COE prices and an out-of-control property market. That’s a straightforward case of certain high-profile consumer goods affecting the inflation rate disproportionately.

Similarly, the (all-items) inflation rate reported in December 2021 was the result of a steep increase in air fares. Bearing in mind that Singapore is an import nation, the rising energy prices have a profound impact on our all-round expenses.

So, what other items can we expect to see a price hike in this year? Here’s what MAS says according to their latest report published on 25 Mar 2024.

Food: On one hand, global food prices have been on the decline and the S$ trade-weighted exchange rate has been strengthening. Often referred to as the Nominal Effective Exchange Rate (NEER), the latter is an index that measures the overall strength of the Singapore Dollar against a basket of currencies of its major trading partners. These factors should moderate Singapore’s imported inflation.

But on the other hand, MAS also says that local businesses will probably continue passing labour and business costs to consumers in the form of higher prices. So we may still see higher prices on the ground level.

Utilities: Brace for your electricity and utilities bill in the upcoming months. With energy prices on the incline, a higher carbon tax and on the back of the GST increase, your utilities and electricity will be directly impacted. If you haven’t already, don’t wait to switch to the Open Electricity Market for savings.

Transport: According to MAS, we’re anticipating lower private transport inflation in 2024 compared to 2023 because of the increase in COE supply we’re expected to see this year. Mind you, that doesn’t mean prices are going to decrease compared to last year. It just means they’ll increase less.

Travel: Thank goodness the worst of the post-pandemic travel boom is behind us now. Soaring air fares, we are not going to miss you. As hospitality industries around the world recover and improve, we should hopefully see inflationary pressures on leisure travel decreasing in 2024.

Accommodation: As Singapore is expected to see an increase in the supply of housing units for rental in 2024, we should see accommodation inflation tempered too. In fact, Bloomberg Intelligence analyst Ken Foong estimated that Singapore’s residential rents could fall by as much as 10% in 2024. So if you’ve been thinking about moving out and renting a space, this might be your year!


ALSO READ: Should You Take A Personal Loan To Help With The Rising Costs Of Living?


 

5. How does the inflation rate affect all of us?

Just to reiterate, the inflation rate is calculated based on the increase from the previous year. So unless inflation is in the negative, prices are still increasing year on year—not falling. It’s just that the smaller the inflation rate, the smaller the increase.

With the projected headline and core inflation rate for 2024 at 2.5–3.5%you will certainly feel the pinch on the day-to-day when you take the public transport, dine out, travel and/or have children.

Some of the repercussions of inflation are immediate.

For example, whether you know it or not, every year that goes by without a decent wage increment will seriously hurt your spending power. Think about that for a second. Did YOUR income increase by at least 2% or 3% since last year to keep pace with inflation? If you didn’t get a raise, you’re actually getting a pay cut.

In fact, inflation can seriously impact our major life decisions. Think about the rising costs of feeding and educating kids, for example. Yikes—kind of dampens one’s enthusiasm for having kids, doesn’t it? (For aspiring parents, thank goodness for the Baby Bonus Scheme!)

 

6. What can Singaporeans do to combat inflation then?

To circle back to the inflation rate and personal finance, I just want to emphasise that the official projected core inflation rate of 2.5–3.5% is NOT the inflation rate you should be looking at when budgeting for yourself, because the CPI does not really reflect how a regular person spends money.

Instead of believing news articles about inflation at face value, take a look at the MAS reports and pay special attention to information that actually affects you, such as food and public transport.

In particular, keep a close eye on costs that you will almost certainly spend more on in the future, such as healthcare and education (if you have or plan to have kids).

On my end, I would make sure that my income is at least keeping pace with the inflation rate. Ideally, it should surpass 3% by leaps and bounds, because there will be a day when I can’t convince my boss to keep me on, even at negative inflation.

One secret to beating inflation actually lies in your spending. Not, I don’t mean cut it down savagely till you’re eating maggie mee every day. I’m talking about cashback credit cards that give you some cash rebates on your expenditure. Of course, don’t spend more than normal just because Citibank and UOB are dangling 8% or 10% cashback carrots in front of you. But for whatever money you normally spend anyway, why not use these cards to earn cashback?

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I’d also try to ensure that my savings and investments are not being completely eroded by inflation. It’s not easy to find low-risk instruments that can beat 3%. Heck, even the CPF OA interest rate is only 2.5%. But using a high-interest savings account or parking my cash in a fixed deposit account might just do the trick. T-bills are currently also bringing in interest rates above 3.5% p.a..

Very importantly, these are all low-risk investments suitable for a beginner investor like myself. The worst thing you could do is to lose money in an already inflationary environment!

 

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