KUALA LUMPUR, Feb 28 — The continuous decline in the Producer Price Index (PPI) inflation provides a positive signal, especially for the Consumer Price Index trajectory in the near term, says MIDF Amanah Investment Bank Bhd Research (MIDF Research).
“However, the higher interest rates in major economies, elevated energy prices, currency fluctuations and continuous geopolitical tensions will continue to be downside risks to global inflation including Malaysia’s price growth pressure in 2023,” the research house said in a statement today.
Citing the report released by the Department of Statistics Malaysia (DoSM) yesterday, MIDF Research said PPI for local production, which measures prices of goods at the factory gate, grew 1.3 per cent year-on-year (y-o-y) in January 2023, registering the slowest pace in two years.
The PPI fell 0.8 per cent month-on-month against December 2022, recording the biggest monthly contraction in four months.
“The moderating price pressures on producers were mainly due to persistent contraction of crude materials cost and moderation of intermediate materials cost. Crude materials inflation stayed on (a) contractionary (path) since August 2022 while cost growth of intermediate materials moderated to a 21-month low at 5.1 per cent y-o-y in January 2023.
“We believe the persistent contraction of crude materials inflation was due to mild correction of global energy prices, whereas improvement of intermediate materials cost inflation was partly attributed to the easing global supply chain pressure,” it said.
Moving forward, MIDF Research forecast lower cost pressure for Malaysia’s producers, especially with lower global commodity prices and easing global supply chain pressure in particular with the reopening of China as well as better supply of labour and materials globally.
— Bernama
