MIDF Research forecasts headline Consumer Price Index (CPI) inflation to moderate to 3.0 per cent in 2023 from 3.4 per cent last year with upward price pressures from food inflation and increased demand.
In its Economic Brief note, it said that given commodity prices remaining below the high levels of last year, it expects reduced cost pressures, signalling further moderation in consumer price inflation.
The Statistics Department (DoSM) yesterday reported that Malaysia’s Producer Price Index (PPI) contracted at a faster pace of 4.6 per cent year-on-year (y-o-y) in May 2023 versus the 3.0 per cent drop posted in the preceding month.
DoSM said the slide in the PPI for local production was attributed to the decline in several sectors, namely agriculture, forestry and fishing; mining; and manufacturing.
“This was expected in line with the steeper PPI deflation in the primary sectors, given the relatively lower commodity prices compared to a year ago.
“Similarly, prices by producers for intermediate materials, supplies, and components contracted sharper by 1.6 per cent (Apr 2023: -0.1 per cent),” MIDF Research said.
The research firm also noted a rise in producer prices for finished goods which moderated to 3.0 per cent y-o-y (Apr 2023: 3.5 per cent), the fourth month of easing after peaking at 4.5 per cent y-o-y in Jan 2023. On a month-on-month basis, producers’ inflation contracted by 0.4 per cent (Apr 2023: 0.2 per cent y-o-y).
“We believe the continued deflation in producer prices explained the more moderate reading in CPI inflation, which slowed to 2.8 per cent y-o-y (Apr 2023: 3.3 per cent),” said the research firm.
