Disinflation to persist in 2015 on back of much lower transportation, housing costs

Expect zero or even negative price growth.

Singapore will see persistent disinflation in 2015, on back of a large decline in transportation costs and the gradual correction of housing prices.

According to Deutsche Bank, average inflation will hover between 1% to zero percent in 2015, “which would act as a de facto tax cut for Singapore’s consumers.”

The report notes that transportation costs have declined primarily due to COE supply rising, but considerably more disinflation is in the pipeline from declining energy prices.

“Indeed, a repeat of 2009, when the transportation component of the CPI declined by nearly 10% yoy is quite likely in 2015, in our view. With transportation and housing prices, key sources of inflation in recent years, easing sharply, the economy is on course to end 2014 with zero or negative price growth,” noted Deutsche Bank.