Why Singapore's Inflation Feels So High

The latest figures from the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) indicate a sustained easing of consumer price pressures. This moderation is largely attributed to a significant slowdown in services inflation, which fell to 0.4 per cent from 0.7 per cent in July, driven by reduced costs in holiday expenses, airfares, and inpatient services. Such data points to a broader trend of decelerating price increases across several key sectors.

For instance, while electricity and gas costs saw a quicker decline of 5.7 per cent in August due to falling electricity prices, the cumulative increases from previous periods, coupled with the rising cost of utilities across the board, can still feel substantial to the average homeowner. The Singapore Department of Statistics reported that the overall CPI for utilities and other fuels increased by 6.7% year-on-year in Q2 2023, underscoring the ongoing pressure despite recent moderation in specific components. This highlights how sustained price hikes in one area can easily overshadow minor dips in another, contributing to the overall perception of escalating expenses.

However, the exclusion of private transport and accommodation costs from core inflation is precisely why many Singaporeans feel the official numbers don't fully reflect their daily financial struggles. Housing, whether rental or mortgage, and Certificate of Entitlement (COE) prices for cars represent substantial outlays for a significant portion of the population. When these major expenditures continue to climb, as they have recently, the perceived cost of living can feel significantly higher than the core inflation rate suggests.

Private transport inflation, conversely, saw an uptick, rising to 2.4 per cent from 2.1 per cent in July. This was driven by a larger increase in car prices and a smaller decline in petrol prices, reflecting the continued high demand and limited supply within Singapore's vehicle market. COE premiums for Category B cars (above 1,600cc or 130 bhp) hit a record high of SGD150,001 in October 2023, while Category A COEs (up to 1,600cc and 130 bhp) reached SGD106,000. These exorbitant costs mean that while petrol prices might fluctuate, the barrier to car ownership remains incredibly high, affecting perceived affordability for many.

Food inflation was unchanged at 1.1 per cent as a slight moderation in non-cooked food inflation was offset by a mild pickup in food services inflation. This stability in the overall food category masks the continued upward pressure on specific items. For example, the prices of fresh vegetables and fruits have seen significant increases, with some staples rising by as much as 15-20% over the past year due to supply chain disruptions and climate change impacts. The overall food services inflation for Q3 2023 was reported at 5.5% by the Department of Statistics, significantly higher than the overall food inflation, reflecting the rising operational costs for F&B establishments.

Domestically, slower nominal wage growth combined with continued increases in labor productivity are expected to contribute to a moderation in unit labor costs, thus dampening internally generated inflation. Data from the Ministry of Manpower shows that nominal wage growth moderated to 4.2% year-on-year in Q2 2023, down from 7.0% in Q1. Furthermore, enhanced government subsidies for essential services are designed to absorb some of the cost pressures, particularly within the services sector, providing a crucial buffer for households. The recent announcement of an additional SGD1.1 billion Cost-of-Living Support Package in September 2023, including Community Development Council (CDC) vouchers (SGD500 for eligible households) and U-Save rebates, aims to directly alleviate some financial strain on households.

However, the effectiveness of these measures in fully alleviating the burden of high living costs is a constant point of debate. While government support can certainly cushion the blow, the underlying structural factors contributing to Singapore's high cost of living—such as land scarcity, strong currency, and reliance on imports—continue to exert upward pressure on prices for essentials. The cumulative effect of these factors often makes the "feels expensive" sentiment a deeply entrenched reality for many.

The official forecast for both core and overall inflation to average between 0.5 per cent and 1.5 per cent in 2025 suggests a period of continued, albeit tempered, price growth. For consumers, navigating this environment requires a proactive approach to personal finance. Understanding the components of inflation and how they specifically impact individual household budgets is more crucial than ever. Focusing on areas where one has control, such as discretionary spending and careful consideration of major purchases like vehicles or housing, can help mitigate the effects of rising costs.

​Furthermore, with food inflation remaining a concern, disciplined budgeting for groceries and a conscious effort to reduce reliance on food services can make a tangible difference. Leveraging loyalty programs, bulk purchases where practical, and even home cooking can help to stretch household budgets further. As the economy continues to evolve, keeping abreast of government support schemes and subsidies for essential services will also be vital to tap into available financial aid and manage cost-of-living increases effectively.