Why yesterday was a 'perfect day' for the Singapore economy

Inflation dropped a massive 2ppt.

According to DBS, it has been a great day. Firstly, there was a significant upward revision in the first quarter GDP growth. Now, there's a sharp drop in the April CPI inflation.

DBS also said that no one is complaining. And if one adds the better than expected industrial production performance, it marks a perfect day for the Singapore economy.

Here's more from DBS:

Headline inflation came in at 1.5% YoY. That’s a massive 2%-pt drop from 3.5% in the previous month. While everyone has expected a significant moderation, it appears that the correlation between the plunge in COE premiums and the CPI inflation has been underestimated.

Tighter financial terms on car purchases introduced by the MAS earlier have hit car demand, resulting in the sharp declines in the COE premiums. This consequently has a strong knock-on effect on the headline inflation figure.

However, underlying cost pressure is still high and the labour market is still tight. Such pullback in inflation could be transient as price pressure is expected to pick up later in the year.

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