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Inflation, Investing and Everything

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Sunday May 25, 2008

Singapore inflation rate hits new 26-year high of 7.5% in Apr 2008

This article belongs to the Singapore inflation watch story arc.

channelnewsasia.com :

Singapore's annual [CPI] inflation rate rose to a new 26-year high of 7.5% in April [2008] as food, housing and transportation costs soared and is now a risk to the economy, the government said on Friday [23 May 2008]. Food prices alone rose 8.5%, transportation and communication were 7.0% higher and housing costs became 11.8% more expensive, the statistics department said. It said April's inflation rate is the highest since February 1982, when it stood at 9.0%. Oil prices surged to unprecedented record peaks of more than US$135 a barrel on Thursday [22 May 2008] and analysts said it could still go higher.

Ravi Menon, second permanent secretary at the trade ministry, said inflation is emerging as a bigger risk to the economy : "We expect food and oil prices to remain elevated over the near term and filter through into domestic prices." The trade ministry said inflation should remain around the current levels for the next two months and ease in the second half of the year. Analysts said the central bank could further strengthen the Singapore dollar in a bid to tame inflation.

- And of course, the 7.5% inflation rate is just the official CPI figure. Actual street prices are in many cases running much higher than that. Official "second half easing" talk notwithstanding, my opinion is that eventually we will hit the double-digit inflation figures of the 1970's and there is some chance that we could go beyond that.

And if (or might that be "when") we go beyond double-digit inflation and into triple-digit inflation, we'll be going into hyperinflationary territory. Most people see global hyperinflation as a rather remote possibility at this moment, but remember that most people also saw triple-digit world crude oil prices as a rather remote possibility just a couple of years ago. Inflation is going exponential and we ain't seen nothing yet.

Updated :

1. Singapore CPI inflation rate for May 2008 continues at 26-year high of 7.5%

(2008-05-25 19:20:56 SGT) [Biz] Permalink

Singapore : SMRT adds 700 extra MRT train trips a week costing it S$5m annually

channelnewsasia.com :

SMRT is increasing the number of its train trips. In one week, there will be at least 700 more trips to cut commuters' waiting time and provide them with a more comfortable ride. A common complaint by MRT passengers is that it gets very crowded at peak periods and on many occasions, commuters aren't able to get on the train.

SMRT said they are already operating at the best intervals of two minutes at the peak within peak and can't improve this any further, for now. However, a few commuters were concerned that fares would go up with the increased trips. The additional train trips are expected to cost SMRT an additional S$5 million yearly.

- The transport companies of Singapore aren't exactly charities, so one of two things would happen : margins will be reduced which could lead to cost- (if not corner-) cutting, or prices would have to go up. If they can absorb the additional cost from their existing margins without sacrificing service quality that would be great, but it remains to be seen how this will turn out. That's from an economic point of view. From a peakoiler's point of view, an increase in MRT train trips is a good thing : it encourages more people to go for public transport instead of driving, and that reduces both oil demand and pollution.

(2008-05-25 17:54:11 SGT) [Energy] Permalink

Indonesia hikes fuel prices by 28.7% despite protests

channelnewsasia.com :

Indonesia hiked the cost of fuel by around 30% Saturday [24 May 2008] in response to soaring global oil prices and a ballooning subsidy bill, leaving hard-pressed households facing even more economic woe. Long queues formed at petrol stations ahead of the announcement late Friday [23 May 2008] that prices would rise by an average 28.7% from midnight due to record oil costs that have sucked state money out of social programmes. Many ordinary Indonesians say higher fuel prices combined with the recent surge in the cost of food will put an intolerable strain on family budgets.

The price hike sparked protests across the sprawling archipelago of 234 million people when it was flagged earlier this month by President Susilo Bambang Yudhoyono. The government was at pains to point out that even with the price hike Indonesians still enjoyed some of the cheapest fuel in the world. Indonesian motorists are now paying 33.33% more to fill their tanks with premium gasoline at 6,000 rupiah (65 cents) a litre, while diesel has leapt 27.9% to 5,500 rupiah. Inflation came in at just under 9% in April and is tipped to reach 12% in the coming months as the new fuel prices ripple through the broader economy. The last fuel price rise in Indonesia was a whopping 126% in 2005, sparking mass demonstrations but no long-term unrest.

- As crude oil prices continue to set new records, governments which have been subsidizing fuel prices are finding it harder and harder to keep up their fuel subsidies without running into serious budget deficits, or in some cases making existing deficits even worse.

Indonesia has it particularly bad, with its rapidly depleting oil and gas fields proving to be a double whammy for the government as reduced production results in both less supplies for domestic use and less foreign exchange from exports. The situation may not be good for the overall geopolitical stability of the region as well.