PETALING JAYA: Malaysia’s Producer Price Index (PPI) has increased by 10.7% in August compared to a 9.7% rise in July, suggesting that upstream cost pressures are becoming more pronounced.
The growth was largely due to the mining sector, which saw a hike of 41.2%, government data showed.
The Statistics Department said in a statement that the mining sector’s increase was largely driven by the extraction of crude petroleum, which grew by 49.8%, while the extraction of natural gas rose by 14.7%.
Meanwhile, the manufacturing sector increased by 8.8%, compared to 8.2% in the preceding month, mainly driven by the manufacture of coke and refined petroleum products (33.5%) and the manufacture of computer, electronic and optical products (12.4%), it said.
The agriculture, forestry and fishing sector also rose by 4.6%, moderating from the 7.2% increase recorded in July, with animal production registering a growth of 13.9%.
The utility-related sectors remained on an upward trend, with water supply and electricity and gas supply increasing by 7.8% and 6.4%, respectively, the department said.
The PPI generally measures the price levels received by a producer at the initial stage of commercialisation.
An economist with a bank-backed brokerage told StarBiz that the stronger PPI could signal some upward pressure on consumer prices, moving forward.
“The pass-through may, however, be limited. Malaysia’s headline inflation was only 1.9% in August, suggesting that higher producer prices may not yet have translated fully into consumer inflation,” he said.
The economist said the fact that August’s PPI was driven particularly by mining and manufacturing, indicated that higher commodity and production costs were feeding through the supply chain.
Executive director of the Socio-Economic Research Centre, Lee Heng Guie, also said the strong increase in PPI meant suppliers and manufacturers face steeper production costs for energy, which they often pass down the supply chain.
“A sustained rise in PPI acts as a leading indicator for consumer inflation as higher production costs typically force businesses to raise retail prices for final consumer goods later on,” he said.
On a month-on-month (m-o-m) basis, the PPI local production rose by 1% in August, compared to a 0.7% increase recorded in July.
The department said by stage of processing, all three stages of the PPI local production recorded an increase in August.
The crude materials for further processing index rose by 24.8% year-on-year compared to 24.1% in July, mainly driven by non-food materials (28.5%).
In the meantime, the department said that the intermediate materials, supplies and components index grew by 9.6% from an 8.4% increase in the preceding month, supported by processed fuel and lubricants (20%).
The finished goods index went up by 3.1% compared to 2.5% in the previous month, driven by the capital equipment (4.3%), it added.
The department noted that on a m-o-m basis, all three stages of processing also recorded increases.
The crude materials for further processing index increased by 2.3%, followed by the intermediate materials, supplies and components index at 0.9%, it said, adding that the finished goods index also registered a marginal growth of 0.1%.
