KUALA LUMPUR, March 28 — MIDF Research expects headline inflation to stay low in the first and second quarters of 2019 as the Producer Price Index (PPI) for February remains on the contractionary path.
It said Malaysia’s producer cost remains deflationary as the PPI shrank by 1.6 per cent in February, mainly due to continuous falling input prices of manufacturing and agriculture sectors.
MIDF Research said factory input has been on a negative growth for 14 consecutive months.
“Referring to input price of food products, the component fell by 10.1 per cent, year-on-year in February 2019.
“As food items hold almost the majority share in Malaysia’s Consumer Price Index (CPI), we expect headline inflation to pick-up at a modest pace,” it said in a note.
Nevertheless, it predicted food inflation to stay above the overall, given Malaysia is a net importer of food.
In addition, the continuous falling in input prices would support Malaysia’s industrial activities.
For the first half of 2019, MIDF Research expects the PPI to remain low, given that retail fuel prices of RON95 and diesel are capped at lower levels compared to 2018’s average prices.
Overall, the PPI is likely to rise by 1.5 per cent and producer price inflation to average at 1.5 per cent this year.
“We anticipate inflationary pressure from fuel-related items to pick up gradually, in tandem with modest improvement in global energy prices and solid demand by developed and emerging economies,” it added.
Globally, MIDF Research said it sees a slight rebound in the PPI, amid a gradual pick up in energy prices in 2019.
It said most of emerging countries recorded contraction in February, with China’s PPI remained in negative territory of -3.5 per cent since November 2017, while that of Thailand dropped 0.6 per cent. — Bernama
