August inflation dipped to 5-month low

• August inflation eased to +2.0% yoy; 0.0% mom
• Food prices rose slower; Transport inflation moderated further
• Core inflation slowed to +0.6% yoy
• Surge in global inflation slows in August
• Headline inflation to remain moderately stable

Malaysia’s CPI eased gradually to 2.0% yoy in August compared to 2.2% yoy in the previous month. This was the seventh straight month of inflation since February 2021 and hit a 5-month low. The gradual moderation was taken into account the fading base effect, sustained higher crude oil prices, consumer mobility restrictions, government subsidies, and price controls. On a monthly basis, consumer price was flat compared to 0.6% drop in the previous month.

The increased in the non-food price index eased slightly to 2.4% yoy (Jul: +2.6%) while the food price index grew by 1.2% yoy (Jul: +1.3%). CPI without fuel, which covers all goods and services except RON95, RON97 and Diesel, increased 0.5% in August (Jul: +0.8%). Meanwhile, durable goods price was flat in August (Jul: +0.9%). The prices of semi-durable goods remained unchanged, declining by -0.3% yoy (Jul: -0.3%), while non-durable goods rose higher by 4.8% yoy (Jul: +4.6%).

Meanwhile, CPI for the period of January to August 2021 increased 2.3% compared to the same period last year. The incline was attributed by Transport (+11.0%), Food & Non-Alcoholic Beverages (+1.4%) and Furnishings, Household Equipment & Routine Household Maintenance (+1.3%).

Food inflation stalled amidst government intervention. The index for Food & Non-Alcoholic Beverages (FNAB), which contributes 29.5% of CPI weight, moderated to 1.2% yoy in August (Jul: +1.3%; Jun: +1.3%; May: +1.5%) due to the setting of maximum retail prices for pure palm cooking oil, and people stayed at home amid higher daily COVID-19 cases. The prices rose included oil & fats (Aug: +3.5%; Jul: +4.1%; Jun: +4.0%; May: +3.4%), fish & seafood (Aug: +3.5%; Jul: +3.4%; Jun: +3.3%; May: +3.2%), food products not elsewhere classified (Aug: +2.0%; Jul: +2.1%; Jun: +2.0%; May: +2.3%), and milk, cheese & egg (Aug: +1.0%; Jul: +1.9%; Jun: +1.5%; May: +0.6%). Among the index of goods which recorded year-on-year price increase in most states were bitter gourd (130.9%) and blended cooking oil (10.8%). The index for food away from home rose slower by 1.0% yoy (Jul: +1.3%; Jun: +1.3%; May: +1.4%). Meanwhile, prices increase of food at home rose to +1.4% (Jul” +1.3%; Jun: +1.3%; May: +1.5%).

Transport price inflation continued to taper off in August. Transport price eased to 11.0% from +11.6% in July (Jun: +16.6%) because of the fading effect of the low base albeit persistent of higher global oil prices. In addition, transport prices recorded double-digit growth for the fifth month because of the lower base from low fuel prices last year. The moderation was attributed by the operation of personal transport equipment (Aug: +14.7%: Jul: + 14.3%; Jun: +20.6%; May: +32.8%) outweighed the downfall in transport services (Aug: -10.1%: Jul: -0.4%; Jun: +0.1%; May: +4.4%). The increase in costs of personal transport equipment was contributed mainly by inflation for the fuels & lubricants which remained at double-digit growth at 22.7% (Jul: +21.8%; Jun: +32.8%; May: +56.1%), reflecting the movement in domestic retail fuel prices. The average price of Unleaded Petrol RON95 in August 2021 increased to RM2.05 per litre compared to RM1.68 in August 2020. In addition, the average price of Unleaded Petrol RON97 increased to RM2.74 per litre as compared to RM1.98, while the average price of Diesel increased to RM2.15 as compared to RM1.81 in August 2020.

Core inflation remained idled. Core inflation - which excludes most volatile items of fresh food as well as administered prices of goods and services – eased to +0.6% yoy (Jul: +0.7%). Core inflation stayed below the 1.0% level for the eleventh consecutive month. Services inflation grew slower by 0.5% yoy in August, down from the previous month (Jul: +0.7%; Jun: +0.8%). This suggests that underlying demand price pressures have remained subdued amid lingering pandemic uncertainties.

Source: BIMB Securities Research - 27 Sept 2021