High rents and car prices won't ease in 2012

New inflation outlook warns that rental and vehicle costs will remain constrictingly high for the rest of the year.

Domestic commodity items, though, could give consumers a much-needed respite as their global markets continue to weaken, helping to pull down overall inflation to around 3.5-4.5% on average for the year.

"Accommodation cost will remain the largest contributor to CPI-All Items inflation this year as leasing contracts continue to be renewed at rentals that are considerably higher than those under existing contracts, especially in the HDB segment. Taking into account the recent announcement of a smaller cutback in vehicle population growth rate in August, car prices are still expected to remain elevated on a year ago basis given the relatively tight COE supply," said the Monetary Authority of Singapore and Ministry of Trade and Industry in a joint release.

"Meanwhile, wages and other business costs will continue to pass through to consumer prices, albeit at a more moderate pace than that seen early this year. There could also be downward pressure on the prices of domestic commodity-related items given the recent weakness in global commodity markets. MAS Core Inflation could therefore ease gradually in H2 2012," they said.

"For the year as a whole, CPI-All Items inflation is expected to be 3.5-4.5% while MAS Core Inflation will likely be in the range of 2.5-3.0%. Accommodation and cars will together account for more than half of CPI-All Items inflation, while services and commodity-related items will each contribute around one-fifth," they added.

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