Singapore: inflation and production outlook – DBS

DBS economists Taimur Baig and Radhika Rao project Singapore’s headline and core inflation will rise in July to 2.4% and 2.3% year-on-year, respectively, driven by higher energy and food costs. They also forecast industrial production growth to accelerate to 9.0% year-on-year, led by electronics and precision engineering, while noting uneven factory performance due to cost pressures and supply disruptions.

Higher prices and stronger output

"We expect Singapore’s headline and core inflation to rise to 2.4% yoy and 2.3% yoy, respectively, in July, from 1.9% yoy and 1.6% yoy in June. The pickup was due to the delayed pass-through of higher global energy costs reflected in the sharp 17% increase in electricity tariffs in 3Q26, alongside firmer food price increases."

"This build-up in underlying price pressures likely validated the central bank’s decision to very slightly increase the appreciation pace of its currency policy band at its July review."

"Policymakers will likely maintain their vigilance and a slight hawkish stance toward upside inflation risks in their commentary on the inflation outlook, given the ongoing disruptions and conflict in the Middle East."

"We forecast industrial production growth to rise to 9.0% yoy in July, from 7.2% yoy in June. This was driven primarily by robust expansion in the electronics and precision engineering clusters, both of which continued to be underpinned by strong global demand for artificial intelligence-related hardware."

"However, factory performance remained uneven, as rising cost pressures and supply chain disruptions in the Strait of Hormuz continue to weigh on chemicals and general manufacturing clusters."