Malaysia’s CPI up 3.9%

  • Business
  • Thursday, 22 Jun 2017

The Goods and Services Tax (GST) rolls in at midnight and many consumers are rushing to buy items they believe will cost more after the new tax. Thronging malls and marts, they are snapping up smartphones, electronics, medicines and groceries but not all those purchases may result in savings.

PETALING JAYA: Malaysia’s consumer price index (CPI) measuring headline inflation rose a lower than expected 3.9% in May compared to a year ago as fuel prices fell.

Economists had expected a 4.1% rise in the CPI, which includes volatile food and fuel prices. Core inflation, which excludes food and fuel, rose 2.6%.

The CPI rose 4.4% in April and to an eight-year high of 5.1% in March. Compared to April, headline inflation was 0.5% higher.

Statistics Department data showed that the transport gauge that includes fuel was 13.1% higher in May compared to April’s 16.7%. Other groups that contributed to the CPI included food and non-alcoholic beverages, recreation services and culture, health, restaurants and hotels as well as housing and utilities.

Nomura Holdings Inc senior economist Euben Paracuelles said in a report that the May inflation data supports the view that March marked the peak for inflation this year.

He expects inflation to moderate throughout the rest of the year with full-year headline inflation of 4% compared to Bank Negara’s 3% to 4% range.

Meanwhile, Citigroup Inc economist Kit Wei Zheng said the rise in core inflation has now gone above the central bank’s comfort threshold of 2.3% to 2.5%.

Bank Negara’s measure of everyday price inflation and perceived price inflation, which both captures price increases in frequently purchased items that make up 60% of the CPI basket, has been persistently higher than headline CPI. Kit said this could be seen as a proxy for elevated inflation expectations.

“With the output and private consumption gap likely to turn positive in 2017, alongside a pick-up in wage growth, we suspect Bank Negara’s benign view of demand-pull inflation could be challenged within the next six to 18 months,” he added.

Kit said Malaysian policymakers face more pressure to raise benchmark interest rates compared to the rest of Asean.

“The precise timing remains uncertain however, and we see a risk that moderating headline inflation could give room to postpone a hike into 2018,” he said.

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