CPI up 1.5% in June in line with expectations

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

PETALING JAYA: The country’s consumer price index (CPI) rose 1.5% in June, in line with analyst expectations, due to the low base effects arising from the removal of the goods and services tax (GST) last year.

The Statistics Department said in a statement that the abolition of the GST had led to the increase in some of the indices of the main groups – furnishings, household equipment and routine household maintenance (+3.1%), recreation services and culture (+2.7%), food and non-alcoholic beverages (+2.3%) as well as housing, water, electricity, gas and other fuels (+2.3%).

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

“Of the 552 items covered in the 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 the CPI rising by 1.5% in June on-year, while RAM Ratings had expected a 1.6% increase.

The Statistics Department said the 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 and Putrajaya (+1.7%) – surpassed the national CPI rate of 1.5% in June 2019 as compared to June 2018. Perak and Johor showed the same rate of increase in inflation as the national CPI.

All states registered an increase in the index of food and non-alcoholic beverages.

The highest increase was recorded by Kuala Lumpur (+4%), Penang (+2.8%), Perak (+2.7%) and Selangor and Putrajaya (+2.6%).

Socio-Economic Research Centre executive director Lee Heng Guie told StarBiz that the headline inflation, which ticked higher in June, reflected the lapsing of the consumption tax following the zerorisation of the GST in June last year.

“Inflation increased by 0.2% in the first half of the year. Although inflation is expected to stay at the current level, hinging on the timing and magnitude of the targeted fuel subsidy as well as other cost factors associated such as the soda tax, inflation pressure will remain subdued at least in the next six to 12 months,” Lee said.

“Fuel prices remain the wild card. On balance, we now expect the headline inflation to increase by 0.8% in 2019, a downward revision from our previous estimate of 1.0%-1.5%.”

Lee also said the moderate inflation pressure provided the monetary space to continue adopting accommodative interest rates to support domestic demand should any threat to growth arise.

JP Morgan Research said in its notes that headline CPI is likely to average 1.2%-1.4% year-on-year in the second half of the year.

“A recalibration of the current blanket fuel subsidy to benefit lower-income households in the coming months is forecast to raise inflation later this year. However, the underlying inflation trend would likely remain benign,” it said.