January inflation jumps to 3.5%

Malaysia Retail Chain Association (MRCA) president Datuk Liaw Choon Liang (inset top lrft) said the local retail sector was cyclical and should

PETALING JAYA: Inflation jumped with the consumer price index (CPI) measuring headline inflation for January rising 3.5% compared to a year ago on increases in all 12 major groups tracked by the consumer price gauge.

However, this was still below the median forecast of a 3.7% increase in prices.

Data released by the Statistics Department showed that the gauge was slightly lower in January compared to December although core inflation rose 3.6% in the month under review compared to a year ago.

JF Apex, which said in a note that the CPI reading was above its expectation of 3%, expects the gauge to continue to rise, by 3.3% year-on-year in February, on price gains in the main groups of the index including food, alcoholic & tobacco and housing, water, electricity, gas & other fuels.

The brokerage said a low-base from last February would also push the gauge higher.

“However, we expect the transport index to remain negative on a monthly basis amid lower petrol price in the second month of 2016.

“The RON95 is priced at RM1.75 per litre, which was 10 sen less from January, RON97 at RM2.05 a decrease of 20 sen, while diesel is on sale at RM1.35, which was a drop of 25 sen.

“Meanwhile, we maintain our inflation forecast of 2.9% year-on-year for the full year of 2016 amid increases in public transportation charges, toll rates and the abolishment of electricity rebates for certain segments of the population,” it said.

The research house noted that Bank Negara’s monetary policy committee decision to keep the overnight policy rate (OPR) unchanged at 3.25% came within its expectations. At the current level of the OPR, the stance of monetary policy remains accommodative and supportive of economic activity, it said. “Thus, we maintain our view that Bank Negara will keep the OPR at 3.25% in 2016 with inflation is still manageable at this junction,” it added.

Meanwhile, AllianceDBS Research expects private consumption to come down this year due to the higher cost of living.

The research house has halved its private consumption number to 3.3% for this year, from 6% last year.

“Besides, the weak ringgit exchange rate has led to higher cost of imports – adjusted Import Price Index (excluding food and mineral fuels) spiked 3% in December last year, up from 1.4% registered in January this year,” it said. AllianceDBS Research expects elevated price pressures to persist in the coming quarters. It has maintained inflation forecast of 3% this year from 2.1% last year and gross domestic product growth to slow to 4.5% this year from 5% last year.