• CPI eased to 3.7% yoy and declined 0.2% mom

• Core inflation grew slightly lower at 2.3%

• Global inflation remains stable

• Inflation expected to moderate in 4Q17

Malaysia’s consumer price index (CPI) in October eased to 3.7% from 4.3% registered in the previous month. The growth was contributed by the transportation index (Oct: 12.1%; Sep: 15.8%). The index for food and non-alcoholic beverages (FNAB), which accounted for 30.2% in the CPI weights, rose 4.4% in October (Sep: 4.6%).

On monthly basis, headline inflation declined 0.2% after posting two months of positive growth (Sep: 0.3%; Aug: 0.9%). The deterioration was mainly driven by the FNAB index which dropped by -0.5% mom. Furthermore, transportation index was also fell by 0.2% in October (Sep: 2.0%).

CPI for the period January-October 2017 registered an increase of 4.0% compared with the same period last year, mainly due to an increase in the food and non-alcoholic beverages index (+4.3%).

The index of transportation group continued to be the main contributing factor of the strong CPI. The low base effect of this index in October 2016 coupled with higher fuel prices remained as the major catalyst for the higher growth in the transportation index. The average price of 1 litre of RON95 petrol was RM2.18 in October 2017 (Oct 2016: RM1.80; Sep 2017:RM2.19; Aug 2017: RM2.12). As for RON97, the average price increased to RM2.48 in September 2017 (Oct 2016:RM2.15; Sep 2017:RM2.48; Aug 2017: RM2.39). The average price of Diesel in October 2017 was RM2.13 as compared to RM1.75 registered on the same period of last year (Sep 2017: RM2.08; Aug 2017: RM2.04). Fuels & Lubricants for personal transport equipment accounted for 7.8% of the CPI weights.

Core inflation slightly lower. Core inflation, which excludes nine of the most volatile items of fresh foods, as well as administered prices of goods and services, grew at 2.3% in October. Among the major groups which influenced the higher core rate were price increases for food & non-Alcoholic beverages (+4.0%), housing, water, electricity, gas & other fuels (+2.8%), restaurants & hotel (+2.7%), furnishings, household equipment & routine household maintenance (+2.6%), health (+2.4%) and transport (+2.1%).

Source: BIMB Securities Research - 27 Nov 2017