Singapore core inflation rate comes in softer than expected, hits fresh four-year lows

Singapore's August core inflation reached a multi-year low of 0.3%, significantly below expectations, with headline inflation also declining to 0.5%, driven by softer services prices. This disinflationary trend coincides with the Ministry of Trade and Industry's upward revision of its full-year 2025 GDP growth forecast to 1.5%-2.5% from earlier projections, despite anticipating weaker second-half growth following a robust 4.3% expansion in Q2. The Monetary Authority of Singapore further projects core inflation to average 0.5%-1.5% in 2025, a substantial decrease from 2.8% in 2024, signaling a more benign inflation environment alongside revised growth expectations.

Analysis

Singapore's economy is exhibiting clear signs of disinflation, with August core inflation falling to 0.3%, its lowest level since February 2021 and below the 0.4% consensus forecast. This deceleration, driven by softer services prices, is reinforced by headline inflation also easing to 0.5%. The Monetary Authority of Singapore's projection for core inflation to average between 0.5% and 1.5% in 2025, a steep drop from 2.8% in 2024, signals that price pressures are expected to remain subdued. Concurrently, the growth outlook has been materially upgraded. Despite an anticipated slowdown in the second half of the year, a stronger-than-expected Q2 GDP expansion of 4.3% has prompted the Ministry of Trade and Industry to revise its full-year 2025 growth forecast upward to a range of 1.5%-2.5%, a significant improvement from its prior 0%-0.2% projection. This combination of rapidly cooling inflation and a more resilient growth forecast points toward an emerging 'soft landing' scenario, providing the central bank with considerable policy flexibility.

Key Decisions for Investors

• Given the rapid decline in inflation and the central bank's dovish forward guidance, investors should anticipate a stable monetary policy environment, which is constructive for Singaporean fixed-income and rate-sensitive assets like REITs.
• The upgraded full-year GDP forecast provides a more favorable backdrop for Singaporean equities, however, this optimism should be tempered by the expected growth slowdown in the second half, warranting a selective approach over broad-based exposure.
• The concurrent data points strengthen the 'soft landing' narrative, suggesting investors should closely monitor high-frequency growth indicators to confirm the trajectory before increasing allocations to cyclical sectors sensitive to domestic demand.