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Singapore’s core inflation grew at its fastest pace in four years due to the soaring costs of electricity and gas, new data published on Thursday showed. 

Singapore’s core consumer price index (CPI) logged a 1.9% uptick in July year-over-year, which was greater than June’s figure of 1.7% and above a median forecast of 1.7% from Reuters analysts. This means that core inflation has increased by the largest amount since four years ago, when a 2% rise took place back in August 2014.

The Ministry of Trade and Industry (MTI) and the Monetary Authority Singapore (MAS) released a statement to coincide with the latest figures, saying that the uptick was due to higher electricity and gas costs. It added: “This reflects an upward revision in electricity tariffs in July following the pickup in global oil prices in the preceding quarter.”

Gas and electricity costs have been on an upward trend for some time now, but the 12.7% surge last month was significant and a marked increase on the 3.7% rise seen in June.

While the core CPI surged, headline inflation was more stable and only saw a 0.6% rise in July compared to the same month a year earlier. This figure matched June’s 0.6% increase and was below a recent median forecast from analysts, which predicted a 0.7% uptick.

Food inflation was also unchanged in July at 1.5%, while service inflation cooled slightly from 1.7% in June down to 1.5%. This moderation was due in part to more modest rises in healthcare and education services and domestic services fees and airfares back in summer 2017.

The MAS and MTI believe that imported inflation will inch higher in the coming months on the back of rallying oil prices and expectations that global food commodity prices will also rise. Domestic sources of inflation will follow suit, while stronger growth of wages will drive demand domestically.

While a gradual rise is on the cards, the MAS and MTI expect consumer price increases to slow for the time being. They said: “However, the extent of consumer price increases will remain moderate, as retail rents have stayed relatively subdued, and firms’ pricing power may be constrained by market competition.”

Core inflation expectations for the full year have not changed and are likely to inch higher during H2 and end somewhere between 1.5-2%. Headline inflation for the same period should finish in the upper range of the 0-1% forecast.

‘With Brent crude oil prices moving higher, the risk is biased towards higher, rather than lower, inflationary environment in Singapore in the months ahead,’ Francis Tan, UOB Economist said. ‘Cost-push type of inflation – rather than a demand-pull type of inflation – due to higher international oil prices will only mean lower purchasing power for Singaporeans.’

Tan also expects the central bank to remain steadfast in its commitment to a cautious monetary policy due to the ongoing trade conflict between China and the US and its potentially negative impact on medium-term economic growth and MAS staying on course with its current inflation expectations.

SIM Global Education Senior Lecturer Dr Tan Khay Boon revealed on Thursday that an expected modest overall inflation rise is not a major issue, but rising costs of health and education could soon become a problem as lower-income households may struggle to afford them.

Tan Khay Boon added: “The higher core inflation relative to headline inflation also means that inflation pressure is increasingly real to households, and this has arisen from higher costs in utilities and transport, which are in turn due to higher food and oil prices.”