Are accommodation and private road transport segments dragging Singapore’s inflation?

The two heavyweight segments remained in the contractionary zone.

Singapore's consumer price index made its smallest YoY decline since July 2015, falling 0.3% in August. But what really drags the city-state's inflation?

According to a note by UOB, price levels of accommodation and private road transport, which make up 34% of total consumer basket, remained in the contractionary zone when observed on a YoY basis.

"In fact, accommodation costs had been contracting for 25 consecutive months, while private road transport costs were in a contractionary trend for 26 (except for 2 months of positive growth in between)," the note said.

In August, accommodation costs fell 3.6% YoY, similar to the decline posted in July, while private road transport costs were down 1.0% from the previous month's -4.4% YoY.

However, the UOB argued that the pace of decline in both segments seemed to have slowed.

"Rather, on a m/m NSA basis, the all-items (aka: headline) consumer prices in August have gone up by 0.5%, when compared to a month ago because of that. The key drivers for the stronger price actions came from accommodation (+1.4% m/m NSA), and private road transport (+1.2% m/m NSA)," UOB pointed out.