Headline inflation moderated to +2.3% YoY in Jan (Dec: +3.2% YoY), lower than consensus estimate of +2.5% YoY. The moderation mainly stemmed from lower housing, utilities & fuels and transport, but was buoyed by higher food & beverages inflation. Meanwhile, core inflation continued to rise to +1.6% YoY (Dec: +1.1% YoY).

DATA HIGHLIGHTS

Headline inflation moderated to +2.3% YoY in Jan (Dec: +3.2% YoY), lower than consensus estimate of +2.5% YoY. On a MoM basis, CPI eased slightly (+0.3%; Dec: +0.4%) following moderate food & beverage growth (+0.6%; Dec: +1.0%) which offset the pickup in transport (+0.4%; Dec: +0.1%), furnishings, household equipment & maintenance (+0.6%; Dec: +0.3%), recreation services & culture (+0.8%; Dec: +0.3%) and restaurants & hotels (+1.0%; Dec: +0.4%).

On a YoY basis, the moderation mainly stemmed from lower housing, utilities & fuels (+0.7% YoY; Dec: +3.4% YoY) and transport (+6.0% YoY; Dec: +9.5% YoY), but was buoyed by higher food & beverages inflation (+3.6% YoY; Dec: +3.2% YoY), furnishings, household equipment & maintenance (+3.1% YoY; Dec: +2.7% YoY), restaurants & hotels (+2.1% YoY; Dec: +1.3% YoY) and recreation services & culture (+1.2% YoY; Dec: +0.4% YoY).

The transport index eased (+6.0% YoY; Dec: +9.5% YoY) following slower RON 95 petrol price (+9.8% YoY; Dec: +17.0% YoY), RON 97 (+41.1% YoY; Dec: +46.2% YoY) and diesel (+5.3% YoY; Dec: +10.7% YoY) growth relative to the previous year.

However, the index picked up on a MoM basis (+0.4%; Dec: +0.1%) due to the increase in RON 97 petrol price amid steeper global Brent oil price.

Food inflation accelerated to +3.6% YoY (Dec: +3.2% YoY) amid increase in ‘food away from home’ (+3.1% YoY; Dec: +2.2% YoY) and steady ‘food at home’ (+4.1% YoY; Dec: +4.1% YoY). The meat category moderated (+7.8% YoY; Dec: +8.3% YoY) following lower average chicken price, but remained the highest contributor to growth in this index group. Other items involved in the Keluarga Malaysia Maximum Price Scheme, such as eggs (+12.2% YoY; Dec: +12.8% YoY) and vegetables (+5.0% YoY; Dec: +5.0% YoY), also saw prices stabilise. On the global front, food inflation eased further (+19.5% YoY; Dec: +23.5% YoY) amid moderation across meat, cereals, oils and sugar.

Services inflation rose (+1.2% YoY; Dec: +0.9% YoY), driven by restaurants & hotels (+2.1% YoY; Dec: +1.3% YoY), recreation services & culture (+1.2% YoY; Dec: +0.4% YoY) and education (+0.7% YoY; Dec: +0.2% YoY). Communication was left unchanged.

Core inflation (DOSM) continued to rise to +1.6% YoY (Dec: +1.1% YoY), mainly lifted by transport (+3.3% YoY; Dec: +1.9% YoY), furnishings, household equipment & maintenance (+3.1% YoY; Dec: +2.7% YoY), food & beverages (+2.8% YoY; Dec: +2.1% YoY) and restaurants & hotels (+2.1% YoY; Dec: +1.3% YoY).

HLIB’s VIEW

Recent developments surrounding heightened Russia-Ukraine geopolitical tensions could exert further upward pressure to global oil prices. While this effect may be largely insulated by the domestic petrol price ceiling, we may continue to see upside risk from the cost inflation front owing to continued disruptions to the global supply chain and higher commodity prices. We maintain 2022 CPI forecast at 2.0% YoY.

Source: Hong Leong Investment Bank Research - 25 Feb 2022