June inflation up 1.5% after GST zero-rated year ago

The Statistics Department said on Wednesday the abolishment of GST led to the increase in some of the index of the main groups in June.

KUALA LUMPUR: Malaysia's inflation rate, as measured by the Consumer Price Index (CPI) rose by 1.5% in June this year, which was in line with a survey, due to the low-base effects arising from the removal of the Goods and Services Tax (GST) last year. 

The Statistics Department said on Wednesday the abolishment of GST led to the increase in some of the index of the main groups namely furnishings, household equipment & routine household maintenance (+3.1%), recreation services & culture (+2.7%), food & non-alcoholic beverages (+2.3%) and housing, water, electricity, gas & other fuels (+2.3%).

“CPI stood at 1.5% in June 2019 to 121.4 as against 119.6 in the same month of the preceding year,” the chief statistician Datuk Seri Dr Mohd Uzir Mahidin said.

“Out of 552 items covered in CPI, 381 items showed positive growth in June 2019 as against June 2018. On the contrary, 131 items posted negative growth while 40 items remained unchanged,” he said. 

Bloomberg's survey had forecast CPI rising by 1.5% in June on-year. RAM Ratings has expected a 1.6% increase.

The department said CPI in the second quarter of 2019 increased by 0.7% to 121.3 as compared to 120.5 a year ago.

Three states Kuala Lumpur (+2.2%), Penang (+2.2%) and Selangor & Putrajaya (+1.7%) surpassed the national CPI rate of 1.5 per cent in June 2019 as compared to June 2018. Perak and Johor showed the same rate of increase as the national CPI.

All states registered increase in the index of food & non-alcoholic beverages.  The highest increases were recorded by Kuala Lumpur (+4%), Penang (+2.8%), Perak (+2.7%) and Selangor & Putrajaya (+2.6%).

To recap, RAM Ratings stated on Monday the CPI  had plunged to 0.8% in June 2018 after the removal of the GST, from 1.8% the preceding month. The accelerated inflation this June is expected to be underscored by a more broad-based set of drivers, it said.

“RAM has also revised its inflation projection for 2019 down to 1.0%, from the earlier 1.6%. Year to date, inflationary pressure has been weaker than expected, particularly from the food component and the reintroduction of the Sales and Service Tax last September,” it said. 

The rating agency said the delayed implementation of targeted fuel subsidies, which would have elevated consumer fuel prices to market levels in the second quarter of 2019, represents another key contributing factor to its downward revision. 

Based on its estimates, the fair market price will likely stay above the current price ceiling through the rest of this year.