Monetary Authority of Singapore Annual Report 2011/2012
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Consumer Prices and Wages were Strong

Notwithstanding the slowdown in domestic economic growth, overall employment rose by 122,600 in 2011, exceeding the 115,900 gain in 2010. Reflecting the tight labour market, the unemployment rate reached a 14-year low of 2% in 2011. Consequently, wage growth accelerated to 6%, up from 5.6% in 2010.

Meanwhile, CPI-All Items inflation rose from 2.8% in 2010 to 5.2% in 2011, underpinned by sharp increases in accommodation and private road transport costs due to a tight housing rental market and smaller Certificate of Entitlement (COE) supply, respectively. (Chart 2) MAS Core Inflation, which excludes the costs of accommodation and private road transport, rose to 2.2% in 2011. This was up from 1.5% in 2010, mainly due to the sharp rise in global commodity prices and some services costs. CPI-All Items inflation will likely remain elevated in H1 2012 before easing modestly thereafter.

Notably, the temporary shortage of completed dwellings and the tight COE supply will keep residential rentals and car prices relatively high. Earlier wage and other cost increases could also continue to pass through to consumer prices, albeit at a more moderate pace. For 2012 as a whole, CPI-All Items inflation and MAS Core Inflation are forecast to be 3.5-4.5% and 2.5-3% respectively.

Chart 2