The Department of Statistics Malaysia (DOSM) announced that the rate of inflation for November 2022 remains at 4%, the same as the previous month.
Although the rate for November 2022 shows that inflation is not continuing to increase, the 4% inflation rate still needs to be curbed so as not to burden the people, said Economy Minister Rafizi Ramli.
One category of expenditure which affects inflation the most is the price of food items and non-alcoholic beverages. The statistics show that 29.5%
of all household expenditure categories — which determine the Consumer Price Index — was spent on food items and non-alcoholic beverages.
Expenditure on food and non-alcoholic drinks can be broken down into food at home (at a weighted 16.9% of expenditure) and food outside the home (at 11.5% of expenses).
“After three weeks of working at the Ministry of Economy, I have examined data sets related to the prices of food and non-alcoholic beverages as has been reported by DOSM and the Ministry of Domestic Trade and Cost of Living. Some initial hypotheses that I concluded include that there is inelasticity and interconnectedness between demand and supply for food items and non-alcoholic beverages.
“In general, if the price of an item becomes expensive, consumers will buy less and that will ultimately affect the price which is charged by the supplier,” he added.
Rafizi explained that this is not the case with the prices of food and non-alcoholic beverages among Malaysians including from the habit of buying food from outside the home (from restaurants, stalls and others).
Although the prices of food and non-alcoholic beverages continue to rise, people continue to buy and pay at higher prices charged by the retailer and this to some extent contributes to the continued increase in the prices of this category.
“For example, for the month of November 2022, the inflation rate remains at 4% because it is driven by the increase in food and drink prices instead of those with alcohol (up at a rate of 7.3% for November compared to 7.1% month before). This increase was partly due to higher prices for ready-to-cook food, especially those that are chicken and flour-based.
“Efforts to control inflation require the cooperation from all parties, from the government, traders to the people. Ministries are now actively coming up with immediate measures to repair the value chain at the supplier level to ensure that prices do not rise steeply.
“At the same time, I think we should raise awareness for the people to be more agile in responding to price increases, especially in buying food and non-alcoholic beverages to ensure demand and supply becomes more elastic. Meaning, if the price charged by a retailer is felt to be too high compared to the average price of other retailers, consumers must stay away from that retailer so that the reduced demand factor will suppress sucj retailers to charge lower prices,” Rafizi said.
The Minister added, while the ministries are working on medium to long-term measures on the supply side, we have to improve the elasticity of the interrelated price and supply in an effort to deal with inflation. The Ministry of Economy will focus on fair price accountability in the short term and develop an ecosystem based on price data from across the country to inject price and supply elasticity.
Rafizi hopes this consumer driven ecosystem, expected to be developed and launched within a month, will help add elasticity on the demand side, as one effort to control inflation in the future.
