While headline inflation has been on a general uptrend in the first six months of the year, the rise in food prices has eased over the same period, due to factors such as the strong Singapore dollar.
The Retail Price Watch Group (RPWG) said in a press release – issued by the Ministry of Trade and Industry – that the Consumer Price Index (CPI) for food has fallen from 3.8 per cent in January to 2.3 per cent in June, compared to a year ago.
And as the Dairy Farm Group and NTUC FairPrice yesterday pledged to either freeze prices or offer discounts on household brands, economists TODAY spoke to said food inflation will remain in check, despite concerns over global food prices spiking due to bad weather in several countries.
A below-average monsoon in India caused the United Nations Food and Agriculture Organisation to recently cut its 2012 global forecast of rice production.
Dry weather in eastern Europe has also dimmed crop prospects in key grain exporting countries like Russia and Kazakhstan.
Yesterday, Senior minister of State (Trade and Industry and National Development) Lee Yi Shyan noted that, while the global commodity market remains volatile, Singapore’s long-term supply contracts will buffer food prices from fluctuations.
Apart from the strength of the Singapore dollar, “healthy competition” in the Republic’s domestic retail market has also helped retailers “keep their price level low”, said Mr Lee, who also chairs the RPWG.
Mr Lee was speaking at a Dairy Farm Singapore event where the group – which runs supermarket chains including Cold Storage and Shop N Save – pledged to freeze the prices of 43 house brand items, including bread, rice, cooking oil and diapers, until the end of the year.
NTUC FairPrice also announced yesterday that it will re-introduce discounts – of between 5 and 10 per cent – for its house brand products until the end of the year.
The moves by the Dairy Farm Group and NTUC FairPrice will cost them S$2.3 million and S$3.3 million, respectively.
According to the RPWG, prices for some common food items have declined or remained fairly stable in the second quarter, compared to between January and March.
In RPWG’s sample basket of 17 common food items, the average retail prices of nine items have declined, four have remained the same, while the remaining increased by less than one per cent. For instance, the price of eggs have fallen by about 4.7 per cent while the price of sugar has increased by 0.6 per cent.
The economists said that while the outlook for global food prices is uncertain, Singapore’s strategy of diversification of food sources and the strong Singapore dollar would continue to help keep price increases under control. And they said that the increase in food prices is expected to continue to moderate in the second half of the year.
DBS economist Irvin Seah said: “In the following months, barring severely prolonged bad weather conditions, supply stockpile in our major suppliers such as Thailand and the strength of Singapore’s currency will provide us with a buffer against food price fluctuations.”
CIMB regional economist Song Seng Wun said he expects the United States drought to eventually have some impact on the pricing of livestock. Still, he said: “Sound inventory control of our major food suppliers such as Thailand and Malaysia helps moderate our food prices. In the near term, I believe any increase due to supply disruption issues will be on the lower base.”