Singapore's Inflation Cools to 4-Month Low as Electricity Prices Plummet

Energy costs drove a sharp pullback in Singapore’s inflation metrics during July, with core inflation sliding to 0.5% and headline inflation dropping to 0.6% from June’s 0.8%. The unexpected decline, particularly in electricity and gas prices which fell 5.6% month-over-month, caught market forecasters off guard who had anticipated prices to hold steady. This represents the most significant deflationary pressure seen in the city-state over the past four months.

Energy and Retail Weakness Lead Price Declines

The cost of electricity—typically a stabilizing factor in Singapore’s consumer basket—emerged as a key disinflationary force. Following a 3.9% drop in June, electricity prices fell an additional 5.6% in July, signaling a sustained easing in household utility expenses. Beyond the energy sector, retail goods and apparel saw prices ease as clothing, footwear, and household appliances weakened. This combination created the conditions for core inflation to compress despite earlier expectations for stability.

Accommodation costs also retreated, with rental and maintenance expenses declining enough to push housing-related inflation down to 0.5% from 1%. Service-sector inflation held relatively steady at 0.7%, though outpatient care and social services showed notable price softening. These gains were partially offset by food inflation ticking up to 1.1% due to higher raw food and dining-out costs.

Policy Response: Wait-and-See Stance

The Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) opted to hold policy steady following these developments, maintaining their established 2025 inflation guidance of 0.5% to 1.5% for both core and headline measures. This cautious posture reflects policymakers’ acknowledgment of cross-currents in the economic environment.

MAS highlighted twin risks to the outlook: geopolitical tensions could lift imported energy and freight expenses, while sub-trend global or domestic growth might keep inflation suppressed longer than anticipated. The authority factored in moderating imported inflation supported by falling global oil prices and controlled food cost increases, alongside declining unit labor costs stemming from wage moderation and productivity gains.

Where Inflation Remains Sticky

Despite the broad disinflationary trend, certain pockets showed resilience. Public transport inflation accelerated to 2.1% from 2%, driven primarily by higher vehicle pricing. The food sector also bucked the cooling trend, with dining services and raw ingredient costs climbing, suggesting that while Singapore’s electricity and energy dynamics have shifted dramatically, domestic demand and supply constraints remain present in specific categories.

The July inflation print underscores how heavily energy dynamics can weigh on headline measures, with electricity price movements alone reshaping the inflation trajectory for the entire economy. As consumers feel relief at utility bills, underlying momentum in services and food prices reminds policymakers that disinflationary forces remain unevenly distributed across the consumer basket.