PETALING JAYA: Producer prices remain under pressure as businesses assess whether higher input costs will eventually filter through to consumers.
Even so, easing monthly price momentum points to the prospect that inflationary pressures could gradually become more manageable over the coming quarters.
Kenanga Research said it was maintaining its 2026 forecast for the producer price index (PPI) growth at 3.7%, following an expected contraction of 2% in 2025, despite June’s stronger-than-expected reading.
The research house noted that while headline producer inflation came in above expectations, underlying price momentum was beginning to cool.
“Although June’s headline PPI surprised to the upside, the moderation in monthly price momentum suggests upstream inflation is unlikely to accelerate indefinitely,” Kenanga Research said.
“We continue to expect producer price inflation to ease gradually over the coming quarters, supported by lower global commodity prices, fading base effects and a firmer ringgit, which should help contain imported input costs,” it added.
According to the Statistics Department, the PPI accelerated to 9.2% year-on-year in June from 7.8% in May, marking the strongest increase in 48 months.
Manufacturing recorded stronger price growth, while mining and the agriculture, forestry and fishing sectors continued to post elevated inflation.
On a month-on-month basis, however, producer prices rose 0.6% in June compared with 1.1% in May, suggesting that upstream price momentum had started to ease.
Kenanga Research said the impact on the consumer price index (CPI) should remain contained despite higher producer prices.
“The pass-through to consumer inflation is expected to remain manageable.
“While elevated producer prices may place upward pressure on selected manufactured goods and food prices, we expect CPI to stay relatively contained, supported by targeted fuel assistance measures such as Budi95 and Budi Diesel, alongside the firmer ringgit,” it noted.
However, it cautioned that renewed geopolitical tensions or another sharp increase in global energy prices remain the key upside risks to both producer and consumer inflation.
For context, the stronger June PPI reading reflected continued cost pressures across key production sectors, although the slower monthly increase indicated that price gains were becoming less intense than in previous months.
Separately, MBSB Research said the sharper increase in producer prices signalled mounting cost pressures across the economy. The brokerage pointed out that the inflation outlook remained exposed to upside risks amid concerns over prolonged supply disruptions.
Even so, it noted that CPI inflation remained well anchored within Bank Negara Malaysia’s forecast range of 1.5% to 2.5%, supported by existing price controls and targeted subsidy frameworks.
Meanwhile, one analyst told StarBiz that the latest PPI suggested cost pressures remained elevated, but the moderation in monthly momentum was an encouraging sign that upstream inflation may be approaching a more stable phase.
“The key question now is how quickly these easing pressures feed through the broader economy,” he said.
