Malaysia’s inflation moderates to 1.8% in October, the lowest in 30 months

[KUALA LUMPUR] Malaysia’s inflation rate eased to 1.8 per cent in October – the lowest since April 2021 – on the back of a higher base last year and slower growth in food prices, a Department of Statistics Malaysia (DOSM) report indicated on Friday (Nov 24).

The increase is slower than September’s 1.9 per cent as well as the forecasts of 1.9 per cent by a Reuters poll of economists.

Core inflation, which excludes volatile items and those with government-administered prices, was down to 2.4 per cent, from 2.5 per cent in September.

As food prices stabilise and subsidy policies are expected to stay unchanged in the coming months, economists expect the country’s inflation to continue easing.

Brian Tan, Barclays senior regional economist, said both headline and core inflation edged down in October and will likely decline more visibly and bottom out in November due to base effects.

He expects November’s inflation to fall further to 1.6 per cent, and for core inflation growth to moderate to 2.1 per cent, largely due to slower growth in prices in the food segment.

In a co-authored report, UOB economists Julia Goh and Loke Siew Ting said the slower growth in food prices and steady fuel pump prices are helping to cushion the impact from an uptick in the cost of health and recreation services, education, and the restaurant and hotel components. 

With the country’s subsidy policies expected to stay unchanged, UOB has trimmed its 2023 full-year inflation forecast to 2.5 per cent, from 2.8 per cent previously.

From January to October, Malaysia’s inflation went up 2.7 per cent, compared to 3.3 per cent over the same period last year.

Last Friday, Bank Negara revised the forecast of headline inflation to an average of between 2.5 per cent and 3 per cent this year, a narrower range than the projection in May of between 2.8 per cent and 3.8 per cent.

The central bank’s governor Abdul Rasheed Ghaffour attributed the decline of inflation growth to easing cost pressures, but noted that changes to domestic policy on subsidies and price controls as well as global commodity prices would affect the inflation outlook.

Bank Negara expects the inflation rate to average between 2.1 per cent and 3.6 per cent in 2024.

MIDF Research foresees only limited pressure on local producers to increase selling prices, given that inflation in the Producer Price Index (PPI) has remained below that of the Consumer Price Index (CPI). Malaysia’s PPI grew 0.2 per cent year on year in September, from a decline of 2.2 per cent in the previous month.

“We expect the elevated commodity prices will continue to influence cost pressures in the primary sectors and prices of crude materials,” said MIDF on Friday.

The DOSM report indicated that in the consumer price index, 291 out of 552 – or 70.8 per cent – of items experienced price increases in October. Among these items, the prices of 12 rose by more than 10 per cent, while the prices of 113 items fell.

Prices of food and non-alcoholic beverages, which account for 29.5 per cent of the total consumer price index (CPI), went up 3.6 per cent in October from the year before. Prices of housing, water, electricity, gas and other fuels – making up 23.8 per cent of the total CPI – rose 1.6 per cent.

Overall, Malaysia’s inflation rate in October remained lower than that in several Asia-Pacific countries. The Philippines had one of the higher prints, at 4.9 per cent. South Korea’s rate was 3.6 per cent, and Indonesia’s was 2.6 per cent.

The eurozone experienced inflation of 2.9 per cent, and the US, 3.2 per cent.