• Inflation down 2.9% yoy; core inflation at 1.1%

• Lower consumer demand as well as falling transport prices were the key drivers for the deflation

• Food inflation maintained above 1.0%.

• Transport costs remains low

• Lockdown takes toll on global inflation

• Deflation risks linger but pressures may gradually dissipate in 2H20

Malaysia's inflation rate dropped by 2.9% yoy in May, the same as in a month earlier. This was the third straight month of deflation and the steepest reading on record on the back of the Covid-19 crisis. Lower consumer demand as well as falling transport prices were the key drivers for the deflation. CPI without fuel, which covers all goods and services except RON95, RON97 and Diesel, is at a positive rate of 0.1% in May (Apr: 0.2%). Prices of durable goods increased 2.9% in May (Apr: +2.5%; Mar: +2.1%). Meanwhile, prices of non-durable goods declined 9.3% (Apr: -9.5%; Mar: -2.6%) whilst prices of semi-durable goods continued to decline by 0.7% yoy (Apr: -0.9%; Mar: -0.6%). On a monthly basis, consumer prices consumer prices increased 0.3%, after a 2.7% fall in April. The CPI for the period of January to May 2020 decreased 0.7% as compared to the same period last year.

Source: BIMB Securities Research - 24 Jun 2020