Headline inflation held steady at +4.0% YoY in Nov (Oct: +4.0% YoY), slightly above the consensus estimate of +3.9% YoY. Inflation was supported by stronger growth in food & non-alcoholic beverages, restaurants & hotels, as well as recreation services & culture. Meanwhile, core inflation continued to rise to +4.2% YoY (Oct: +4.1% YoY).

DATA HIGHLIGHTS  

Headline inflation held steady at +4.0% YoY in Nov (Oct: +4.0% YoY), slightly above the consensus estimate of +3.9% YoY. On a MoM basis, CPI gained momentum (+0.3%; Oct: +0.2%), on the back of stronger growth in food & beverages (+0.7%; Oct: +0.5%), restaurants & hotels (+0.5%; Oct: +0.3%), housing, utilities & other fuels (+0.2%; Oct: +0.0%), as well as an upturn in recreation services & culture (+0.2%; Oct: -0.1%).  

On a YoY basis, inflation was mainly supported by higher growth in food & non-alcoholic beverages (+7.3% YoY; Oct: +7.1% YoY), restaurants & hotels (+7.0% YoY; Oct: +6.8% YoY), and recreation services & culture (+3.6% YoY; Oct: +3.4% YoY). Meanwhile, transport (+5.0% YoY; Oct: +5.2% YoY), furnishing, household equipment & maintenance (+3.8% YoY; Oct: +4.1% YoY), as well as housing, utilities & other fuels (+1.4% YoY; Oct: +1.5% YoY) also continued to rise, albeit at a slower pace.  

The transport index eased slightly (+5.0% YoY; Oct: +5.2% YoY), following the moderation in RON97 price growth (+28.8% YoY; Oct: +39.0% YoY) relative to the previous year. In line with this, transport inflation was flat (0.0% MoM; Oct: +0.1% MoM), amid the lower average Brent oil price during the month (USD90.9/brl; Oct: USD93.6/brl).  

Food inflation trended higher at +7.3% YoY (Oct: +7.1% YoY), following stronger ‘food away from home’ (+9.6% YoY; Oct: +9.3% YoY) and steady ‘food at home’ (+5.8% YoY; Oct: +5.8% YoY) growth. Meat inflation spiked higher (+8.2% YoY; Oct: +7.3% YoY), as standard chicken prices continued to average higher during the month (RM9.83/kg), surpassing the control price level set by the government (RM9.40/kg). Similarly, inflation also accelerated for milk, cheese & eggs (+8.9% YoY; Oct: +8.8% YoY), rice, bread & other cereals (+7.5% YoY; Oct: +7.3% YoY), and fish & seafood (+3.5% YoY; Oct: +3.4% YoY). Meanwhile, prices for vegetables (+3.6% YoY; Oct: +4.8% YoY) and fruits (+4.1% YoY; Oct: +5.5% YoY) eased. On the global front, food inflation continued to moderate (+0.3%; Oct: +2.0% YoY), amid slower growth across meat, dairy, and cereals, coupled with declines in oil and sugar prices.  

Services inflation accelerated to +4.4% YoY (Oct: +4.2% YoY), on account of higher growth in restaurants & hotels (+7.0%; Oct: +6.8% YoY), recreation services & culture (+3.6% YoY; Oct: +3.4% YoY), and education (+1.5% YoY; Oct: +1.4% YoY). Meanwhile, communications remained flat.  

Core inflation (DOSM) continued to rise (+4.2%; Oct: +4.1% YoY) driven by higher growth across most groups; mainly food & non-alcoholic beverages (+8.2% YoY; Oct: +7.9% YoY), transport (+7.9% YoY; Oct: +7.7% YoY), restaurants & hotels (+7.0% YoY; Oct: +6.8% YoY) and recreation services & culture (+3.6% YoY; Oct: +3.4% YoY).

HLIB’s VIEW

Core inflation has continued its uptrend. Despite the easing global commodity prices, the second-round effects may still be filtering through, and intensified further by the strong labour market and domestic demand. Hence, we maintain our expectation for BNM to raise OPR by another 25bps in Jan and Mar this year, bringing OPR to 3.25%.

Source: Hong Leong Investment Bank Research - 3 Jan 2023