Consumer price inflation remained in negative region for the fourth consecutive month in June. It fell as expected by 1.9% y/y, bringing the 1H2020 average to -0.8%. This accounts for 53% of our extreme low fullyear projection of -1.5% but slightly below our base full-year projection of -0.6%.

The slower contraction in June was due to higher prices reported in the food and non-alcoholic beverages index. Besides, the core inflation – a gauge excluding fresh food and administered prices of goods and services – climbed gradually by 1.2% y/y in June.

The continued deflationary environment can be seen to provide room for another overnight policy rate (OPR) cut in September by 25bps from the current 1.75%. A cut would provide some comfort to both businesses and households as the 6-month moratorium period is expected to end in September. A lower borrowing cost will also encourage some pent-up demand.

• Consumer price inflation remained in negative region for the fourth consecutive month in June. Inflation fell as expected by 1.9% y/y following a contraction of 2.9% y/y in May. Hence the 1H2020 inflation now averaged at -0.8% which accounts for 53% of our extreme low full-year projection of -1.5% while staying slightly below our base full-year projection of -0.6%.

• The slower contraction in June was due to higher prices reported in the food and non-alcoholic beverages index. This segment saw a rise by 1.6% y/y from 1.2% y/y in May, the fastest gain since January 2020.

• Besides, the core inflation – a gauge excluding fresh food and administered prices of goods and services – climbed gradually by 1.2% y/y in June from 1.1% y/y in May, bringing the first six-month average to 1.3%

Source: AmInvest Research - 23 Jul 2020