Inflation worries remain

Hike in food prices adds to the pressure

KUALA LUMPUR: Food inflation in Malaysia jumped to the highest in 10½ years, hitting 5.2% in May 2022 as 93% of food items saw their prices rise.

Of the 93% items that saw higher prices in the food category, Statistics Department chief statistician Datuk Seri Mohd Uzir Mahidin said in a statement that 29.4% increased in the range of less than 5%, while 37.7% rose between 5% and 10% and 32% jumped more than 10%.

“Food at home and food away from home inclined 5.5% and 5.1% respectively in May, leading to an increase in food inflation.

“The subgroup of meat also showed the highest increase of 9.5% in May 2022 due to the increase in demand during the festive season,” he added.

The higher cost of food saw Malaysia post a 2.8% year-on-year (y-o-y) rise in the consumer price index (CPI) for May.

The May headline inflation was above the 2.6% median growth forecast in a Reuters poll of economists and higher than the 2.3% increase recorded in April.

Economist and Rising Success Consultancy advisor Manokaran Mottain foresees the June CPI inflation to be even higher than May with the hike in the prices of chicken and rice by restaurants.

“Should food prices rise, the benefits of the RM100 aid given to the B40 group would not be felt.

"We should have not lifted the ceiling price of chicken,” he said.

This week, Prime Minister Datuk Seri Ismail Sabri Yaakob announced an increase in the Bantuan Keluarga Malaysia cash aid, in view of the removal of certain subsidies and ceiling prices as well as the rising cost of goods.

Each B40 household will receive an additional RM100 and the handouts will benefit an estimated 8.6 million people and four million households, he said.

Sunway University economics professor Yeah Kim Leng expects food inflation to escalate should the various price controls be removed.

“The cost pass through will result in higher inflationary pressures which could lead to second-round inflation effects.

“Efforts to increase production and supply, including substitutes, enhance market competition and stamp out profiteering are important to limit a further rise in food prices,” he told StarBizWeek.

Centre for Market Education CEO Carmelo Ferlito expects inflation in the country to remain elevated in the second half of the year.

This is due to uncertainties arising from the rising cases of the Covid-19 pandemic and supply chain disruptions as well as excess money in circulation.

“We have to cap government spending, increase household savings and push to increase productivity to contain inflation,” he said.

UOB Kay Hian Research expects the CPI growth to trend higher in the second half of the year as the low-base effects kick in.

“The government has also begun to gradually adjust prices of administered items amid elevated global commodity prices, currency weakness and recovering domestic demand.

“Headline CPI growth may breach 5% at some point in the third quarter of this year should headwinds persist and the government further adjusts subsidies for other price-administered items, posing upside risks to our 2022 full-year headline inflation outlook which is at 3% currently,” it said.

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