MBSB Research said the November PPI data marked the steepest decline since August 2025 and extended the drop in prices to a nine-month streak.
PETALING JAYA: Businesses are likely to maintain their margins going into the new year on lower prices of inputs, given that wholesale prices across the entire value chain have fallen, with government data on Monday showing a contraction in the November producer price index (PPI).
The PPI, a gauge of prices at the factory gate, contracted 1.8% in November on a year-on-year (y-o-y) basis and was down 0.3% month-on-month (m-o-m).
PPI was also down across the entire production value chain.
All stages of processing showed a decline in prices, including intermediate materials, supplies and components, which slumped 1.1% y-o-y, with finished goods declining 0.2% while crude materials for further processing contracted 6.2%.
Lee Heng Guie, executive director of the Socio-Economic Research Centre, noted that this would help businesses preserve their margins as cost pressures eased.
While wholesale inflation has declined, he cautioned in an earlier statement that consumers would see a more stable inflation environment rather than a decline in prices.
MBSB Research said the November PPI data marked the steepest decline since August 2025 and extended the drop in prices to a nine-month streak.
“This largely reflected a sharp decline in prices for the agriculture, forestry and fishing sector (minus 9.7% y-o-y; October 2025: plus 2.7% y-o-y), weighed down by the falling prices for the growing of perennial crops index (minus 16.2% y-o-y).
The mining sector saw a steeper decline of 7.2% after a 1% drop in October y-o-y weighed down by a 5.5% decline in the extraction of crude petroleum and a 11.4% contraction in natural gas.
The manufacturing sector saw a steady price decline of 0.6% y-o-y, which was unchanged from October, mainly due to a contraction in the manufacture of coke and refined petroleum products, which slumped 6.6%.
However, prices rose at a slower pace y-o-y for water supply as well as electricity and gas compared to October.
On an m-o-m basis, sharper declines were seen for the agriculture as well as the water sectors, which contracted 4.6% and 0.8%, respectively, while the pace of monthly PPI inflation in the manufacturing sector was unchanged at 0.3%.
The research house said headline inflation as measured by the consumer price index (CPI) rose at a slightly faster pace in November compared to October, widening the gap between PPI deflation and CPI inflation.
It said CPI inflation “is expected to remain low and stable” in 2026 but does not discount the expanded sales and service tax effective from this July to push up prices modestly for consumers.
“This could be partially offset by the continuation of the RON95 subsidy, a firmer ringgit, and easing global food prices.
“On the other hand, the exclusion of micro, small and medium enterprises from the Budi95 targeted fuel subsidy poses an upside risk to inflation, as higher fuel costs could be passed through to consumer prices,” it said.
