Consumers are driving inflation in Singapore. Here’s why

by Albert02

Consumers are driving inflation in Singapore. Here’s why

Consumers are driving inflation in Singapore. Here’s why. Singaporeans are concerned about rising prices, yet many of them are still out buying for items they can live without, extending nflation for at least another year. According to Singapore’s central bank, discretionary spending will be the largest contributor to inflation this year and next. In Singapore, where price increases are viewed as a global phenomenon rather than a reflection of domestic demand, the situation of consumers driving inflation is uncommon. Managing domestically generated inflation while preventing job losses and an economic slowdown will thus be a challenge for policymakers, who have already authorized tough policy measures to slow the pace of price increases.

Savings accumulated during the Covid-19 pandemic, wage increases following a strong economic rebound in 2021, and the wealth effect from rising property prices, according to analysts, are feeding pent-up demand for discretionary goods and services such as retail, food and beverage, and entertainment. The increase in consumption followed a significant increase in personal savings, which reached a five-year high of $103 billion in 2019, up from $74 billion in 2019. Meanwhile, according to official data from the Department of Statistics (SingStat), personal disposable income and employee compensation have been increasing since at least the second quarter of this year. While inflationary pressures began to emerge in the second half of 2021, they were primarily driven by rising global commodity and goods prices.

Domestic demand began to show itself in rising retail sales only after the Singapore economy was nearly fully reopened in April. According to SingStat data, private consumption spending by households increased by 16.5 percent in the second quarter, nearly double the 8.3 percent increase in the first quarter. Discretionary expenditure contributed for half of the increase in core inflation in the third quarter, a measure of price change that excludes hotel and private transportation costs. The Monetary Authority of Singapore (MAS) now forecasts that non-essential domestic spending would account for the majority of inflation in 2022 and 2023. This contrasts with 2021, when domestically generated inflation was on par with externally induced price increases.

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Source: https://www.straitstimes.com/business/economy/consumers-are-driving-inflation-in-singapore-here-s-why


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