PETALING JAYA: Malaysian consumers appear to be largely shielded from rising upstream costs for now, as mounting cost pressures have yet to trigger widespread increases in consumer prices, according to TA Research.
In a note, the research house said September’s downside surprise warrants a more cautious assessment of the near-term inflation outlook.
“The moderation in utilities inflation, alongside core inflation of 1.7% year-on-year (y-o-y), suggests that higher upstream costs have yet to translate into broad consumer price pressures.
“However, stronger transport inflation and the uptick in food away from home prices show that cost pressures remain in selected segments.”
TA Research continues to expect some upward pressure in the final quarter, although the increase is likely to be more gradual than previously anticipated.
Energy, food, logistics and other operating costs could still feed through to retail prices.
However, electricity bill protection through December should provide a near-term cushion.
“The extent of repricing will also depend on consumer demand, competition and firms’ capacity to absorb higher costs through margins or productivity gains.
“A sustained rise above 2% is therefore less certain than envisaged in our August report,” added TA Research.
It has lowered its full-year headline inflation forecast to 1.9% from 2.1%, reflecting the softer September outcome and continued restraint in cost pass-through.
Meanwhile, Hong Leong Investment Bank Research said the recent escalation of geopolitical tensions and lagged impact of El Nino could lead to stronger inflationary pressures moving forward.
“We therefore maintain our 2027 consumer price index (CPI) forecast at 2.1%.”
However, for 2026, the research house has revised its CPI forecast downward to 1.9% from 2% previously.
This is against the backdrop of continued petrol subsidies, electricity bill protections and limited pass-through of higher input costs to CPI thus far.
In September, headline inflation edged down to 1.8% y-o-y, marginally below the median consensus estimate of 1.9%.
On a month-on-month basis, price momentum eased to 0.1%, weighed down by a decline in housing, utilities and other fuels; coupled with slower inflation in food and beverages; restaurants and hotels; and personal care.
On a y-o-y basis, softer inflation was observed in housing, utilities and other fuels; food and beverages; information and communication, as well as personal care.
Notably, the easing in water supply CPI was partly attributed to a high base effect, as a targeted water price hike was implemented in September 2025.
Meanwhile, the electricity CPI softened, also supported by the expansion of the monthly electricity bill protection threshold from 600kWh to 800kWh from Sept 1 to Dec 31, 2026.
Looking ahead, Apex Research said Malaysia’s underlying price pressures remain subdued.
Core inflation remained steady at 1.7% y-o-y, below its 2021 to 2025 average of 2.1%.
The persistently low core inflation rate points to subdued underlying price pressures, suggesting limited demand side inflationary pressure.
“Barring a material overshoot in Brent price above our assumption of US$85 per barrel for 2027, we expect inflation to remain broadly stable.
“Targeted fuel subsidies should continue to cushion the impact of higher energy prices,” stated Apex Research.
“While the minimum wage increase to RM2,000 could add to business costs, we expect the pass-through to consumer prices to be gradual and modest, consistent with the limited spillover from elevated producer price inflation observed thus far.”
