Elements of Economics - Singapore Inflation

Topics: Inflation, Cost-push inflation, Demand-pull inflation Pages: 3 (805 words) Published: May 19, 2013
The inflation rate in Singapore was rose to 4.9 percent in February 2013. According to CNBC.Com, the rise was mainly because of more significant increase in private road transport costs as well as food and services inflation were also stronger during the month of February. However, the outlook for 2013 inflation was unchanged at 3.5 to 4.5 percent according to Ministry of Trade and Industry (MTI) and MAS. Both MTI & MAS also reiterated core inflation is likely to average 2 to 3 percent for the whole year.

In addition, Nuno Fontes from Trading Economics has said this temporary pick up had been anticipated in the January inflation report due to private road transport cost has climbed by 17.4 percent in February, up from 10.5 percent a month earlier.

Business cycles are dated according to when the direction of economic activity changes. At the peak phase, the level of economic activities within the economy is high. Resources are full utilised and under such circumstances, cost of resources is high because increase price of goods and services produced.

Inflation is defined as a continuous and sustained increase in the general price level for all goods and services and purchasing power is falling over a period of time. It can be analysed as cost push or demand pull inflation, or a combination of such effects.

Inflation rate is a measure of percentage changing prices on a year-to-year basis and its formula is: [(CPI this year - CPI last year) / CPI last year] x 100

When inflation rate is high, the commercial banks will reduce loans or change interest rates, consumption and investment decrease and real GDP will decrease.

Singapore inflation remains stubbornly high caused mainly by a spike in certificate of entitlement (COE) prices, the persistent tightness in the domestic labour market result into wage increases and thus, may passed on to consumers through higher prices and lastly, the housing costs.

Private road transport cost will continue to be...
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