Prices have risen in Singapore for the first time in five months, in a welcome sign that the island state could avert the threat of deflation.

According to the Department of Statistics, increases in the cost of food, clothing and housing meant the main consumer price index rose 0.2% in November, the first upwards move since June.

Forecasters had been predicting further falls, and still believe weak consumer confidence means the spike is short-lived.

But even so, the news is a welcome shot in the arm, after the government last week warned that the state of the world economy meant growth next year would probably be an anaemic 2.0-2.5%.

The previous target of 3.0-4.0% is only three months old, having been set in August.

Avoiding Japan's fate

While price rises may not look good from a consumer's point of view, the dismal year Singapore's trade-dependent economy has experienced has put policy-makers in fear of deflation.

The disappointing state of the US economy in particular has rebounded on Singapore, pushing it into recession in the first three months of the year as trade levels fell as much as 30% from the previous year.

At home, stubbornly price-conscious consumers have kept inflation at bay, raising concerns that Singapore could follow Japan into a deflationary spiral, where prices keep falling and businesses find it impossible to invest.

Even plans to raise consumption tax from 3% to 5% scheduled for the end of the year failed to kick off the expected spending spree ahead of the change.