SINGAPORE, Jan 26 — Consumer prices for the whole of last year fell for the first time since 2002, weighed down by the persistent oil slump, a slowing economy as well as government measures that include those to cool the housing market and transport costs.

Economists said inflation is expected to remain weak for this year. But they added that costs could edge up as some of the Government’s budgetary and one-off measures come to an end over the coming months and as the ongoing El Nino weather phenomenon takes its toll on food supply and prices.

The All-Items Consumer Price Index (CPI) fell 0.5 per cent last year from a year earlier, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) said today. This was the index’s first full-year negative inflation in 13 years and the lowest in nearly three decades since 1986’s 1.4 per cent decline. The MAS Core Inflation, which excludes the costs of accommodation and private road transport, eased to 0.5 per cent last year from 1.9 per cent in 2014, they added. Both the headline and core inflation data were in line with the official forecast.

Last month, the All-Items CPI fell 0.6 per cent from a year ago, slowing from the 0.8 per cent drop in November, due to a pick-up in petrol pump prices and the overall price of services. Nonetheless, the drop still marked the 14th straight month of decline in the index.

DBS senior economist Irvin Seah said: “We expect CPI inflation to remain in the red until the middle of this year, before the base effect brings the headline number marginally above water. The economic slowdown and a whole slew of supply-side policy measures have weighed down on domestic inflation. Externally, energy and commodity prices have slumped on the back of an uncertain global outlook.”

Given the deceleration in economic growth in China and the absence of a strong recovery in the United States and the eurozone, global deflationary pressures will continue to take hold, Seah said. Full-year inflation is likely to average 0.5 per cent this year, he added.

In their statement, the MAS and MTI said external sources of inflation are likely to remain muted, given ample supply buffers in the major commodity markets and weak global demand conditions.

“Notably, global oil prices have fallen by around one-third since mid-October and are expected to remain low in 2016. On the domestic front, some wage cost pressures remain, but their pass-through to consumer prices will be constrained by the subdued economic growth environment,” they said.

The MAS and MTI anticipate MAS Core Inflation to pick up gradually over the course of the year, as the year-on-year disinflationary effects of budgetary and other one-off measures ease. The budgetary measures include medical subsidies under the Pioneer Generation Package, the reduction in the concessionary foreign domestic worker levy, as well as the abolition of national examination fees for Singaporeans. Meanwhile, CPI-All Items inflation will continue to be dampened by lower car prices and imputed rentals on housing, due to an expected increase in the supply of Certificates of Entitlement and newly completed homes, they said.

The MAS and MTI kept their forecasts for CPI-All Items inflation and MAS Core inflation for 2016 at minus 0.5 per cent to 0.5 per cent and 0.5 per cent to 1.5 per cent, respectively. But “there is significant uncertainty over the outlook for average global oil prices for the year as a whole,” they added. “MTI and MAS will continue to closely monitor the developments in global oil prices and assess their impact on domestic inflation.”

Selena Ling, head of treasury research and strategy at OCBC Bank, said: “This suggests that policymakers are cognizant of the downside inflation risks due to the crude oil price correction in the run-up to the April monetary policy review, but remains potentially hesitant to contemplate any policy shifts at this juncture.”

Private road transport costs fell by 1.1 per cent last month, contracting for the sixth consecutive month, but moderating from the 1.7 per cent drop in November. Petrol pump prices rose at a faster pace on a year-on-year basis in December, owing to the low base in the same period last year. This more than offset the larger drop in car prices seen in December amid weaker COE premiums, the MAS and MTI said.

Accommodation costs were 3 per cent lower last month, marking the 17th consecutive month of contraction and reflecting the soft housing rental market. Overall services inflation picked up to 0.9 per cent in December from 0.7 per cent in the previous month, due to a faster pace of increase in holiday travel expenses and a smaller decline in telecommunication services fees.

Food inflation edged down to 1.5 per cent from 1.6 per cent the previous month, as increases in the prices of prepared meals such as hawker food moderated. MAS Core Inflation rose to 0.3 per cent in December from 0.2 per cent a month ago on account of higher services inflation. ― TODAY