Food inflation, a cause of concern

Monetary Authority of Singapore (MAS) released its biannual Macroeconomic Review October 2013 yesterday. Based on this report, I cover matter of food cost in this blog post.

“For the year as a whole, domestic food inflation is expected to rise from around 2% in 2013 to close to 3% in 2014, but will remain lower than the 3.4% average over the last five years.” (Source: MAS Macroeconomic Review October 2013)

Even when expected domestic food inflation is to rise around 2% this year and increasing by 3% next year, prepared food cost do not just rise 2% based on experience on the ground. I take one example of a vegetarian food stall in an air-conditioned foodcourt. It used to cost $3.50 for vegetarian “fish” noodle, now the proprietor increased this dish to $3.80. This is 8.5% increase.  If it is 2% increase in food inflation, then the increase should be mere 7 cents (or round to 10 cents) and not 30 cents increase. Since the increase in price, my family has chosen not to patronise this stall any more. We would find other cooked food stalls that were reasonable in their price increases. As consumers, we have a choice. Walk away if you are not happy with a particular stall.

Come next year, food inflation is forecast to continue to rise (3%) over a new base set this year. So we are in for more price increases in 2014.

Reference information quoted from MAS Review Report

The reason for this food inflation is rising cost pressures faced by operators such as business rentals, COE premiums for commercial vehicles and labour costs. Labour cost pressure is the result of tight labour employment situation and government policy on tightening of foreign labour force into Singapore.

Prepared meals, which have a higher domestic cost component than non-cooked food items, experienced relatively higher inflation. Prices of prepared meals also rose at a faster pace in Q3 2013 compared to their historical trend.

Overall, resident wage growth accelerated to 4.5% y-o-y in H1 2013 from 2.3% in 2012.

Copyright © 2013, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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1 Response to Food inflation, a cause of concern

  1. ken says:

    such price increases are most keenly felt for those without an income or low stagnant incomes. at the rate of price increases these last 5 years, spore is increasingly not a comfortable place to live in. life was definitely happier in the past. could we have remained just as happy had we kept status quo instead of this relentless pursuit of ????

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