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Economist at UOB Group Barnabas Gan assessed the latest inflation figures in Singapore.

Key Quotes

“Singapore’s headline consumer prices fell 0.8% y/y +0.5% m/m sa) in May 2020, marking its third straight month of deflation. Core prices also fell by 0.2% y/y over the same period (versus -0.3% y/y in April 2020).”

“Given that the circuit breaker lasted for the whole of May 2020, it is unsurprising to see lower consumer prices during the period. Lower consumer demand as well as falling transport prices were the key drivers for the deflation.”

“Official rhetoric by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) as released in the accompanying inflation report continued to highlight a “subdued” inflation outlook in 2020.”

We view that deflation pressures may gradually dissipate in 2H20, given earlierthan-expected implementation of Phase Two in Singapore on 19 June 2020 and the gradual return of international travel. We expect a pick-up in retail sales especially during Phase Two, as retail businesses, F&B dine-ins, personal health & wellness, home-based services, and public places such as parks and facilities are allowed to re-open. Separately, the reciprocal lifting of travel restrictions, or known as “green lanes”, could also gradually attract more international arrivals into Singapore.”