Singapore CPI inflation stuck in the negative territory

Singapore's CPI inflation is likely to remain stuck in the negative territory. Headline number for December is expected to register -0.4% (YoY), up from -0.8% in the previous month. The story will be pretty much the same. A whole slew of supply-side policy measures and the economic slowdown have weighed down on domestic inflation. 

On the back of an uncertain global outlook and over-supply the energy and commodity prices have slumped. Crude oil is already below USD 30/bbl given a ballooning supply glut. Deceleration in China is also adding more disinflationary pressure in the global environment. Absence a strong recovery in the US or the Eurozone, which is unlikely at this juncture, global deflationary pressure will continue to take hold. 

The inflation trajectory for the Singapore economy have significantly lowered due to the risks in the global economy and their corresponding impact on global energy and commodity prices. The domestic wage pressure arising from the labour crunch has also dissipated given the dicey growth outlook. Note retrenchment numbers have picked up last year as well compared to 2014. 

"We expect CPI inflation to remain in the red until the middle of this year, before base effect brings the headline number above water. As such, full year inflation is likely to average 0.5% in 2016, with risk on the downside", notes DBS Group Research.