CPI returns to positive territory

24 Apr 2019 / 19:39 H.

PETALING JAYA: Malaysia’s Consumer Price Index (CPI) returned to the positive territory, registering a 0.2% growth to 121.1 in March after experiencing deflation in the first two months of the year.

Headline inflation contracted 0.7% and 0.4% in January and February, respectively, which sparked deflationary fears amid slowing economy.

The CPI expansion in March was driven by the index of housing, water, electricity, gas & other fuels (+2%), education (+1.3%), food & non-alcoholic beverages (+1.1%), alcoholic beverages & tobacco (+1.1%) and restaurants & hotels (+1%) according to the Department of Statistics.

Chief statistician Malaysia Datuk Seri Dr Mohd Uzir Mahidin said on a monthly basis, CPI also increased 0.2% as compared with February 2019, mainly supported by the index of transport (+2.6%), miscellaneous goods & services (+0.4%) and furnishings, household equipment & routine household maintenance (+0.3%).

However, CPI in the first quarter of 2019 declined 0.3% to 120.8 compared with 121.2 in the same quarter of the preceding year, contributed by transport (-5.9%), clothing & footwear (-3.1%), miscellaneous goods & services (-2.2%) and communication (-1.2%).

On a quarterly basis, the CPI decreased 0.1% against the fourth quarter of 2018.

In terms of overall CPI, four states namely Kuala Lumpur (+0.9%), Penang (+0.6%), Selangor and Putrajaya (+0.3%) and Negri Sembilan (+0.3%) surpassed the national CPI rate of 0.2% in March 2019 as compared with March 2018. Meanwhile, Johor showed the same rate of increase as the national CPI.

The increase in the index of food & non-alcoholic beverages was reflected in most states in Malaysia, with Kuala Lumpur recording higher increases of 4.2% for food & non-alcoholic beverages index above the national index level in March 2019.

MIDF Research expects Malaysia’s inflation to stay low following the lower capped prices of Ron95 and Diesel at RM2.08 and RM2.18 per litre respectively.

“Nevertheless, demand-push factor remains firm amid stable job market and steady wage growth.“

It noted that food component will be the key driver of overall inflation in 2019 driven by low-base effects on top of continued spill over effects from the sales and service tax.

“In addition, being a net importer of food, Malaysia is also exposed to imported inflation due to ringgit depreciation hence initiating food inflation to stay at the high-side.”

Overall, the research house lowered its inflation forecast to 1.1% for 2019.

“We foresee headline inflation rate to average at 1.1% this year from 2.2% we initially forecasted due to lower cap of domestic Ron95 fuel prices at RM2.08. Furthermore, we believe the government is unlikely to remove the cap in the nearest time as the proper subsidy mechanism limiting it to the recipients of the Bantuan Sara Hidup have yet comes to effect.”

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