The escalating cost of food production continued to drive up Malaysia’s overall inflation in June, with the consumer price index (CPI) surge 3.4 per cent from a year ago, the highest since early this year.

June’s inflation is also higher than 2.8 per cent in May, led by the food inflation which recorded 6.1 per cent – with 130 food items recorded increases of over 10 per cent. On a monthly basis, the CPI rose 0.6 per cent from May to June.

Mohd Uzir Mahidin, the chief statistician of Department of Statistics Malaysia, said chicken - the largest component in the CPI’s meat segment – has seen prices increase 17.2 per cent, as compared to 13.4 per cent in May.

The average price of processed chicken in June 2022 was RM10.02 (S$3.11) per kilo, as compared to RM8.55 in June 2021, he added.

Global supply disruption continued pushing the price of animal feed, food producers have to pay higher prices for the feedstocks such as maize (14.8 per cent), wheat (60.9 per cent) and soybean (19.9 per cent).

Pork also recorded an increase of close to 15 per cent as compared to 10.2 per cent in the previous month, due to higher animal feed prices and declining meat supply affected by the spread of African swine fever.

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Other than food prices, transport prices rose 5.2 per cent, while restaurants and hotels segment rose 5 per cent.

Despite higher inflation compared to previous months, Mohd Uzir noted that Malaysia’s inflation rate in June is lower than other countries in the Asia Pacific region, such as Thailand (7.7 per cent), the Philippines (6.1 per cent), South Korea (6 per cent) and Indonesia (4.4 per cent).

Although Malaysia’s inflation rate continues to rise since early this year, Wong Chin Yoong, an economics professor at the University Tunku Abdul Rahman Malaysia, expects the uptrend of CPI will decline if not plateauing in coming months.

“Malaysia’s inflation is mainly driven by escalating food and commodities prices, as commodity prices like crude oil and palm oil trending down in July, this should be reflected in consumer prices in late-July or early August,” he told The Business Times.

After Indonesia government removed its export ban on May 23 and implemented exports levy cut in mid-July, the year-to-date spot CPO price in Malaysia has fallen over 40 per cent to RM3,704 a tonne on July 21 - a slump of 120 per cent from its peak of RM8,163 on March 1 this year.

While anticipating inflation rate to ease in coming months, Wong raised the concern of economic slowdown in the second half of the year.

“Global headwinds, coupled with the recent re-allocation of government’s expenditure – by postponing the rollout of mega projects to allocate more funds on food subsidies – could affect the country’s economic growth,” he added.

Earlier in June, Minister in the Prime Minister’s Department (Economy) Mustapa Mohamed said the government is considering delaying mega projects as a means to pay for an estimated subsidy bill of RM77.3 billion this year.