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Malaysian inflation remains subdued, September CPI down 1.4% from a year ago

21 Oct 2020 / 23:28 H.

PETALING JAYA: Malaysia’s Consumer Price Index (CPI) declined 1.4% to 120.1 in September 2020, compared with 121.8 in the same month of the preceding year, attributed to declines in transport (-9.9%), housing, water, electricity, gas & other fuels (-3%) and clothing & footwear (-0.6%) which contribute 41.6% to overall weight.

Nevertheless, food & non-alcoholic beverages increased by 1.4% to 135.1 compared with 133.2 in corresponding month of the preceding year. This group contributes 29.5% of CPI weight. Similarly, miscellaneous goods & services inclined by 2.7%, followed by communication (1.6%) and health (1.1%).

Chief Statistician Malaysia Datuk Seri Mohd Uzir Mahidin said the CPI without fuel shows a positive rate of 0.1% in September 2020 compared with September 2019. CPI without fuel covers all goods and services except unleaded petrol RON95, unleaded petrol RON97 and diesel.

The average price of unleaded petrol RON95 in September 2020 fell to RM1.68 a litre compared with RM2.08 in September 2019. In addition, the average price of unleaded petrol RON97 decreased to RM1.98 a litre compared with RM2.58 while the average price of diesel declined to RM1.73 a litre from RM2.18 in the same month of the preceding year.

The core index rose 1.0% in September 2020 compared with the same month of the previous year. Among the major groups which influenced the increase were miscellaneous goods & services (2.7%), communication (1.6%), food & non-alcoholic beverages (1.4%) and health (1.1%). The core index excludes most volatile items of fresh food as well as administered prices of goods and services.

On a monthly basis, the CPI was unchanged from August 2020. Nevertheless, there were groups that showed an increase, namely, restaurants & hotels (0.2%), alcoholic beverages & tobacco (0.1%), furnishings, household equipment & routine household maintenance (0.1%), recreation services & culture (0.1%) and education (0.1%).

Meanwhile, the CPI in the third quarter of 2020 decreased 1.4% to 120.2 compared with 121.7 in the same quarter of the previous year. On a quarterly basis, the CPI rose 1.5% compared with the second quarter.

The index for all states decreased between -0.8 and -2.2% in September 2020 compared with September 2019. The highest decrease was recorded by Malacca (-2.2%), followed by Sabah & Federal Territory Labuan (-2.2%) and Kedah & Perlis (-2.2%). It was followed by Sarawak (-2.1%), Negri Sembilan (-1.9%) and Johor (-1.9%).

However, all states registered an increase in the index of food & non-alcoholic beverages. The highest increase was recorded by Selangor & Federal Territory Putrajaya (2.4%), then Terengganu (1.6%), Johor (1.5%) and Perak (1.5%).

In a note, CGS CIMB Research said the subdued inflation implies there remains sufficient headroom for monetary policy easing.

“Hence, we see the possibility of a 25 basis point reduction in the Overnight Policy Rate by Bank Negara Malaysia (BNM) on Nov 3, 2020, in reaction to the two-week CMCO 2.0 which we estimate to shave a further 0.18% pt off GDP for 2020. We reiterate our GDP forecast of -4.4% in 2020,” it said.

UOB Research said the overall inflation environment is expected to remain subdued and well anchored around BNMs target of -1.5% to +0.5% in 2020, following elevated unemployment, slower and uneven domestic economic recovery, and lower global oil prices.

Year to date, the deflation rate is at -1%.

Given the extension of electricity bill discounts until end-Dec 2020 and the resurgence of Covid-19 cases, the research house said it is revising its full-year deflation projection to -1% (from -0.5% previously).

“We maintain our 2021 full-year inflation at 2.1%. Downside risks to growth have materialised amid the third wave of Covid-19 infections and reinstatement of tighter movement restrictions in Selangor, Kuala Lumpur, Putrajaya, and Sabah.

“The lower bound of BNM’s GDP projections of -3.5% to -5.5% for this year does assume such downside risks including a setback in global growth, prolonged second/third wave of infections, and targeted movement control order in high risk areas,” it added.

The CPI without fuel shows a positive rate of 0.1% in September 2020 on-year. – REUTERSPIX

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