Sunday March 01, 2009

Singapore inflation rate slows to 2.9% amidst recession and falling demand

This article belongs to the Singapore inflation watch story arc.

bloomberg.com :

Singapore's inflation rate eased to the slowest pace in 16 months in Ja 2009 as oil prices fell and a deepening economic slump hurt demand for goods and services. The Singapore CPI increased 2.9% from a year earlier, after gaining 4.3% the previous month, the Department of Statistics said. Easing prices have allowed policy makers worldwide to cut interest rates and increase public spending to stimulate their economies amid the worsening global recession. The Monetary Authority of Singapore stopped favoring gains in the Singapore dollar in Oct 2008 and some analysts predict the central bank may allow the exchange rate to weaken further in the next review in April.

Food prices, which make up 23% of the index, rose 6.2% in Jan 2009 from a year earlier, following December's 6.5% increase. Transport and communication costs fell 5% as gasoline and automobile prices declined. Inflation may keep easing in the coming months as the island's transport operators prepare to cut bus and train fares. Electricity prices are also falling as Singapore Power cut charges for Q1 2009 by an average 24.7%.

- It's a pretty sure thing to blame apparently falling prices on the ongoing economic collapse worldwide and the rapidly deepening economic recession locally. After all, slowing demand should lead to lower prices, right? On the other hand, it is quite another thing to assume that when inflation does return, it will be because the economy is picking up. It is entirely possible for the economy to keep getting worse while prices of *needs* continue to go up and prices of *wants* continue to go down. Just take a look at the food prices - everyone still needs to eat.

When inflation does return, it could return with a vengeance, and not because the economy is picking up. At the rate governments worldwide are trying to pump their economies to keep them from an all-out crash, something's got to give. And that something would be the individual currencies of all these countries. And when currencies depreciate, what happens? Something to keep in mind.

See also :

1. Singapore economy in recession, GDP contracts 6.3% in Q3 2008, MAS ends currency gain policy
2. Singapore recession deepens as NODX (non-oil domestic exports) fall 20.8% in Dec 2008
3. Singapore, Taiwan GDP may shrink 10-11% in 2009 : CLSA
4. Not just another recession : Singapore NODX exports collapse 34.8% in Jan 2009 in largest fall ever

(2009-03-01 10:53:01 SGT) [Biz] Permalink Comments [1]

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