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, but many of them continue to buy non-essentials, allowing inflation to continue for at least another year. According to Singapore’s central bank, discretionary spending will be the primary driver to inflation this year and next. In Singapore, where price increases are viewed as a global phenomenon rather than a reflection of domestic demand, consumers driving inflation is unusual. Managing domestic inflation while avoiding job losses and a slowing economy will thus be a challenge for policymakers, who have already authorized tough policy measures to slow the rate of price increases.

Analysts believe that pent-up demand for discretionary goods and services such as retail, food and beverage, and entertainment is being fueled by savings accumulated during the Covid-19 pandemic, wage increases following a strong economic rebound in 2021, and the wealth effect from rising property prices. Personal savings increased significantly while consumption increased, reaching 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, personal disposable income and employee compensation have been increasing since at least the second quarter of this year. Inflationary pressures first emerged in the second half of 2021, primarily as a result of rising global commodity and goods prices.

Domestic demand did not begin to express itself in increased retail sales until April, when Singapore’s economy had nearly fully restored. According to SingStat data, private consumption spending by households increased by 16.5 percent in the second quarter, nearly twice the 8.3 percent increase in the first quarter. Discretionary spending accounted for half of the increase in third-quarter core inflation, which excludes hotel and private transportation costs from price changes. Non-essential domestic spending will account for the majority of inflation in 2022 and 2023, according to the Monetary Authority of Singapore (MAS). In 2021, however, domestically generated inflation equaled externally induced price increases.

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