Inflation remains stable despite surging food prices

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Headline inflation rate stayed at 6-month low in Malaysia at +2.2%yoy in Mar-22, slightly lower than Bloomberg consensus +2.3%yoy.

The non-food inflation stayed in deceleration mode as it hit more than a 1-year low at +1.3%yoy, in contrast to a further rise in food inflation to more than 4-year high of +4%yoy.

The upward trend in core CPI indicates the underlying price pressures from growing domestic demand, underpinned by improving labour market conditions and further reopening the economy.

On a month-on-month basis, headline CPI rose at +0.3%mom, with faster price growth in household equipment & maintenance

and restaurants & hotels.

Global food CPI at 10-month high

As a net importer of most food products, rising global food prices will lead to increased local food prices.

Despite moderation from the highs last year, the latest data suggests there will be continued challenges to contain the rise in global food prices. This is the case as the global food inflation accelerated to +33.6%yoy in Mar-22, the highest since Jun-21.

Food inflation +3.5%

“We upgrade our CPI forecast to +2.5% from +2.1%. Following the surge in global commodity prices, we opine Malaysia’s inflationary pressure to be affected indirectly.

“This will be via higher food inflation at +3.5% (Initial projection: +2.3%). Since the government is to continue with its fuel subsidy mechanism, we foresee fuel inflation to remain decelerating and putting non-food inflation to stay low at +2.1% in 2022 (2021: +2.8%),” says MIDF.

Sabah and Sarawak recorded lower price pressure. By state, headline inflation in Peninsular Malaysia stayed at +2.3%yoy while Sabah and Sarawak registered lower inflation rates at +1.3%yoy and +1.7%yoy,
respectively.

“In fact, inflation rates in the Eastern states were at a 1-year low. We opine the deceleration of fuel inflation in Sabah and Sarawak is much faster than in Peninsular.

“In addition, food inflation in Sabah declined from +3%yoy in Feb-22 to +2.5%yoy in Mar-22 while Sarawak had a trivial rise in food inflation as compared to Peninsular,” the analyst firm says.

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