US – Inflation

Inflation in the US accelerated to 8.6%% y/y in May 2022, the highest reading since Dec 2018. Core inflation slowed for the second straight month to 6.0% y/y.

The main impetus was energy prices which increased by 34.6% y/y, the most since September of 2005 due to higher gasoline price (48.7% y/y), fuel oil (106.7% y/y) and natural gas (30.2% y/y). The underlying reason was the higher global commodity prices since the war in Ukraine.

Food prices also increased by 9.7% y/y, where big hikes were seen in the prices of meats, poultry, fish, and eggs. We are not expecting inflation to recede anytime soon given that global commodity prices are high. Gasoline price in the US as of the first week of June 2022 was also higher, averaging at US$4.88/gallon, which is 62.1% higher comparing to June 2021’s average.

The next FOMC meeting is scheduled on 14–15 June, where we expect another 50bps rate hike, pushing the fed funds rate to 1.25%–1.50%.

Malaysia – Industrial Production

Malaysia’s IP production in April increased by 4.6% y/y, which is slower relative to the previous month’s 5.1% y/y. The main driver was the manufacturing sector, which grew by 6.2% y/y (Mar 2022: 6.9% y/y) while production in the electricity sector expanded by 1.5% y/y (Mar 2022: 0.8% y/y).

Only production in the mining sector declined by 0.1% y/y (Mar 2022: 0.3% y/y).

Production is expected to be supported by the manufacturing sector, primarily the E&E segment. Plus, due to the robust demand for E&E products, we expect exports to grow by 8% this year.

For the full year of 2022, our base-case growth projection remains unchanged at 5.6% with an upside of 6.0% while our downside is at 4.8%.

Source: AmInvest Research - 13 Jun 2022