November’s headline inflation slowed to 1.5% YoY (Oct: 1.8%), a 33-month low, and below house and market estimate of 1.7% due to the lower-than-expected food prices. The sharper-than-expected moderation in prices is primarily due to deflationary trends in food prices, both consumed at home and away from home. On a MoM basis, inflationary pressure was muted at 0.0% (Oct: 0.1%), with declining food prices offsetting increases in other categories.
Similarly, core inflation has also experienced a moderation, settling at 2.0% (Oct: 2.4%). This can be attributed to a stagnant growth rate of 0.0% MoM, reflecting the absence of price pressures across nearly all subcomponents. Lower food prices were equally outweighed by an increase in rental and transport services costs. Food & non-alcoholic beverages (2.6%; Oct: 3.6%): slowed to its lowest since October 2021 despite the removal of price controls for chicken and eggs on November
This slowdown is mainly due to a sharp drop in fresh fish and meat prices. Housing, water, electricity, gas & other fuels (1.7%; Oct: 1.6%): rose to a four-month high due to an increase in rental (0.3%; Oct: 0.0%) and maintenance & repair of dwelling (0.1%; Oct: 0.0%) costs. Transport (0.1%; Oct: 0.0%): edged marginally higher due to a MoM rebound in the cost of transport by railway and air. Miscellaneous goods & services (2.3%; Oct: 2.3%): remained unchanged but accelerated by 0.4% MoM (Oct: 0.0%), primarily due to a notable rebound of 3.4% (Oct: -0.8%) in the prices of jewellery rings & precious stones.
Kenanga says it has retained its 2023 and 2024 headline inflation forecasts at 2.5% (2022: 3.3%) and 2.7% respectively. In the coming months, it anticipates headline inflation to maintain a 0.1-0.2% MoM growth, driven by the potential
resurgence of food prices amid the looming possibility of a stronger El Niño in 2024. This, along with other external factors
such as escalating geopolitical tensions, poses an additional risk of pushing prices higher. On the domestic front, the
confluence of the government’s subsidy rationalisation plan, an increase in services tax, and the implementation of the
progressive wage model is expected to heighten Malaysia’s inflationary pressures. Nevertheless, the prospect of further
improvements in the supply chain and a reduction in global demand may help to keep inflation within the 2.5-3.0% range.
Despite expectations of a deceleration in global growth next year, Malaysia’s GDP is projected to continue its expansion,
potentially growing by more than 4.0% YoY. With domestic inflation anticipated to remain comfortably below the 3.0%
threshold on average, the house foresees no inclination for rate cuts on the BNM’s agenda. Consequently, the BNM is likely to
uphold the status quo, maintaining the overnight policy rate at 3.00% throughout 2024.
