PETALING JAYA: The drop in the producer price index (PPI) in November may suggest that there is less inflationary pressure going into the new year, according to the Statistics Department.
It revealed that the PPI, which measures the costs of goods at the producer level, had further decreased by 1.8% in November from a 0.1% decrease in October.
In a statement, chief statistician Datuk Seri Mohd Uzir Mahidin said the drop in the PPI was on the back of the agriculture, forestry and fishing sector that declined by 9.7% due to a double-digit decrease of 16.2% in the growing of perennial crops index.
Concurrently, the mining sector narrowed by 7.2%, attributed to negative changes in both the extraction of natural gas and extraction of crude petroleum indices, which fell by 11.4% and 5.5%, respectively.
“The manufacturing sector also registered a moderate decline of 0.6%, maintaining the same rate of contraction as in the previous month, due to a decline of 6.6% in the manufacture of coke and refined petroleum products index,” Mohd Uzir said.
Economist Geoffrey Williams said he expects consumer inflation to be low in 2026 as cost pressures are lower.
“It may allow greater scope for monetary easing but interest rate policy should remain cautious in my view,” he told StarBiz, adding he expects both the producer and consumer inflation to remain moderate in 2026.
According to Williams, price producers have been flat month-on-month since February this year, while on a yearly basis, it came out as negative for the same period.
“In my view the persistently flat monthly PPI and negative annual PPI are due to a number of factors including lower import costs from a strong ringgit, lower oil prices and stronger competition in the face of the trade and tariff uncertainty this year.
“This makes producers more competitive and is good for consumers,” he explained.
Williams said the strong ringgit makes exports more expensive so producers have to cut costs to compete in overseas markets.
“This also makes imports cheaper so producers have to cut prices to compete against imports in domestic markets too.
“This is the downside of the strong ringgit which is now too strong and holding down prices for Malaysian businesses.”
Lee Heng Guie, executive director of the Socio-Economic Research Centre said the trend of lower PPI had been consistent since earlier this year, suggesting when the price levels are declining, costs are lesser.
“We will likely see easing inflation, this doesn’t mean a decline in prices but a more stable inflation rate. This is in contrast to China, where deflation has been prevalent,” he said.
Lee said moderate inflation pressures in 2026 could like see Bank Negara Malaysia keeping the Overnight Policy Rate at the current rate unless there is a need to take action.
“An occurrence like a slowdown in exports that might go lower than 4% of the country’s gross domestic product (GDP) might see the central bank cutting points.
“If we look at the PPI and falling inflation, it’s steady. So the only thing to look at is whether domestic consumer demand slows down,” he said.
On the PPI for 2025, Sunway University economics prof Yeah Kim Leng said it would likely be down 2%, signifying soft price pressures which would also help to dampen consumer price inflation.
He added given that the Malaysian economy had achieved a higher-than-expected GDP growth of 4.7% in the first three quarters, the corresponding decline in the PPI by 2.1% is not a sign of domestic deflationary distress but a reflection of favourable global cost conditions and a stronger currency.
“November’s PPI shows a further slide to 1.8% year-on-year, bringing the producer’s prices in the first 11 months to 1.9%. The annual change of PPI in 2024 was flat at 0.3%.”
The Statistics Department noted the PPI in Japan showed an increase of 2.7% year-on-year while in China, it remained in a deflation phase, with its PPI declined by 2.2% for November from a decline of 2.1% seen in October.
“This represents the 38th consecutive month of decline reflecting sustained price competition amid persistently weak domestic demand.”
Similarly, Thailand’s PPI contracted by 1.6% in November following a 1.4% decline in the previous month – marking the ninth straight month of year-on-year negative producer inflation, a similar trend in Malaysia.
