In Apr, Malaysia’s Consumer Price Index (CPI) rose 0.1% month-on-month and 3.3% year-on-year, in line with CGSCIMB and Bloomberg consensus’ expectations. Meanwhile for core CPI, no significant gains were recorded month-on-month, taming year-on-year growth to 3.6%.
Apr headline CPI growth was dragged lower by food but sustained by stronger pressures from the transport component. For food, the subcomponent food at home moderated to 5.0% year-on-year, buffered by the implementation of the maximum price scheme for the festive period for 16 days during the month of Apr, said CGSCIMB in the recent Economics Update Report.
Similarly, the subcomponent of food away home moderated to 8.1% year-on-year, which the Department of Statistics Malaysia (DOSM) attributed to the launch of Menu Rahmah, an initiative to encourage traders to sell discounted meals.
Meanwhile, the transport component moderated to 2.3% year-on-year but rose on a month-on-month basis to +0.3% on higher air transport prices, likely reflecting peak holiday season travel.
“There are several developments happening in the near term that warrant close attention. Earlier this year, the government expressed its intention to float chicken prices by Jul, which we believe raises the risk of price pressures ahead,” said CGSCIMB.
Looking at feed costs, such as soybean and corn, prices have tapered lower but remain high on a relative basis, which could mean the risk of cost pass-through to consumers.
However, ahead of another Eid celebration at end-Jun, CGSCIMB expects another round of maximum price scheme measures that should cushion the pressures of food components. Price increases could moderate for other components as well.
“The government has announced a plan to revise electricity tariffs by excluding higher income households from current electricity subsidy for second half 202323. This is aligned with our thesis in the thematic Domestic Electricity Tariff Revision is Next,” said CGSCIMB.
Details of the measures have not yet been announced by the government, but CGSCIMB estimates an adjustment to electricity tariffs could increase year-on-year CPI by 20-60 basis points in 2023.
“Overall, the near-term developments mentioned above elevate the upside risks to our earlier 2023 CPI forecast of 3.0% year-on-year. As such, we raise our CPI projection to 3.3% year-on-year assuming a mild pass-through from chicken prices and limited impact from the electricity tariff revision,” said CGSCIMB.
