Headline inflation eased further to +3.7% YoY in Jan (Dec: +3.8% YoY), matching the consensus estimate. Inflation was mainly weighed down by the decline in communications and slower growth in restaurants & hotels, food & beverages, and transport. Core inflation also moderated to +3.9% YoY (Dec: +4.1% YoY).

DATA HIGHLIGHTS  

Headline inflation eased further to +3.7% YoY in Jan (Dec: +3.8% YoY), matching the consensus estimate. On a MoM basis, CPI grew at a steady pace of +0.2% (Dec: +0.2%), as stronger growth in food & beverages (+0.6%; Dec: +0.5%) and recreation services & culture (+1.1%; Dec: -0.9%) offset the decline in transport (-0.5%; Dec: +0.1%) and communication (-1.3%; Dec: -0.1%).  

On a YoY basis, inflation was mainly weighed down by a steeper decline in communication (-1.4% YoY; Dec: -0.1% YoY), followed by slower growth in restaurants & hotels (+6.8% YoY; Dec: +7.4% YoY), food & non-alcoholic beverages (+6.7% YoY; Dec: +6.8% YoY), transport (+4.0% YoY; Dec: +4.9% YoY), and furnishing, household equipment & maintenance (+3.5% YoY; Dec: +3.7% YoY). These offset the acceleration seen in recreation services & culture (+2.7% YoY; Dec: +2.4% YoY) and the steady growth in housing, utilities & other fuels (+1.5% YoY; Dec: +1.5% YoY).  

The transport index slowed to +4.0% YoY (Dec: +4.9% YoY), following a moderation in RON97 price growth (+9.5% YoY; Dec: +19.0% YoY) relative to the previous year. Similarly, the index also declined on a MoM (-0.5%; Dec: +0.1%), mainly due to a drop in transport services prices (-3.8%; Dec: +9.7%).  

Food inflation trended slightly lower at +6.7% YoY (Dec: +6.8% YoY) following slower growth in ‘food away from home’ (+9.3% YoY; Dec: +9.6% YoY) despite the pickup in ‘food at home’ (+5.1% YoY; Dec: +4.9% YoY). Stronger inflation was seen across meat (+8.3% YoY; Dec: +7.8% YoY), fruits (+4.4% YoY; Dec: +4.0% YoY), fish & seafood (+3.2% YoY; Dec: +2.9% YoY), and vegetables (+1.0% YoY; Dec: +0.9% YoY). Meanwhile, rice, bread & other cereals (+6.7% YoY; Dec: +7.0% YoY) as well as milk, cheese & eggs (+7.0% YoY; Dec: +7.1% YoY) observed softer growth. The implementation of the Festive Season Maximum Price Scheme for Chinese New Year (SHMMP) from 15 to 29 Jan 2023 was also expected to help contain further food price pressure. On the global front, food inflation continued on its downtrend (-3.3% YoY; Dec: -1.1% YoY) amid slower price growth in meat and dairy, and decline in oil prices.  

Services inflation moderated to +4.2% YoY (Dec: +4.4% YoY) dragged by the decline in communication (-1.4% YoY; Dec: -0.1% YoY), alongside slower growth in restaurants & hotels (+6.8% YoY; Dec: +7.4% YoY) and education (+1.3% YoY; Dec: +1.4% YoY). Meanwhile, recreation services & culture picked up pace (+2.7% YoY; Dec: +2.4% YoY).  

Core inflation (DOSM) eased further (+3.9% YoY; Dec: +4.1% YoY), following slower growth in food & non-alcoholic beverages (+7.8% YoY; Dec: +8.1% YoY), transport (+6.5% YoY; Dec: +7.3% YoY), furnishing, household equipment & maintenance (+3.5% YoY; Dec: +3.7% YoY), and decline in communication (-1.4% YoY; Dec: -0.1% YoY).

HLIB’s VIEW

Headline inflation has continued to moderate, reflecting the easing cost environment from global commodity prices. Nevertheless, risks to inflation remain tilted to the upside, stemming from a potential subsidy adjustment as well as China’s reopening on global commodity prices. We maintain our CPI forecast at 3.1%.

Source: Hong Leong Investment Bank Research - 27 Feb 2023