THERE seems to be no respite in the offing for Malaysians than to endure more price hikes in the near term.

Food prices continued pushing headline consumer price index (CPI) higher despite the imposition of price ceilings on essentials such as chicken and eggs.

Below is an excerpt from an economic update by TA Securities Research economists Shazma Juliana Abu Bakar and Farid Burhanuddin as the duo reviewed April 2022’s national inflation which grew by 2.3% to 125.9 year-on-year (yoy) – the 13^th consecutive month of inflation surpassing its 10-year average of 1.9% yoy.

To note, April was Ramadan month this year. Hence, food prices grew by 4.3% year-on-year (yoy) during the month – the highest since January 2018 – following higher demand for food materials, especially from the main sectors of the food industry such as catering, hotels and Ramadan bazaars.

The situation was worsened by weather uncertainties that have affected the maturity of vegetables and caused a decline in supply in the market on top of higher fertiliser prices logistics costs and labour shortage at agricultural sites.

Prices were also higher at restaurant and hotels as well as for household equipment and transport. It was reported that 89.1% of food items in the CPI’s food and non-alcoholic beverages group recorded increases in prices.

In April 2022, all states registered increases in inflation while two states showing increases above the national inflation level of 2.3%. The highest increase was recorded by Selangor and Federal Territory (FT) Putrajaya (3.1% yoy).

Meanwhile, Pahang (1.6% yoy) and Sabah & FT Labuan (1.4% yoy) were two states with the lowest CPI increase.

The increase in inflation in Selangor & FT Putrajaya was contributed mainly by food & non-alcoholic beverages (5.7% yoy); transport (4.4% yoy) and furnishings, household equipment & routine household maintenance (4.3% yoy). In terms of consumption, these three groups contributed 45.6% of expenditure for Selangor & FT Putrajaya.

Soaring food prices will continue to dominant our consumer prices in the coming months amid elevated global commodity prices, domestic supply chain disruptions and depreciation of the ringgit.

As Malaysia imports nearly 60% of our food needs, we are also affected by high import prices aggravated by the weak ringgit which now traded close to RM4.40 against the greenback.

During the Cabinet meeting last Monday (May 23), the Government announced several measures n order to combat rising prices of essential goods as well as managing the chicken supply issues.

The government had previously set the ceiling price of standard chicken at RM8.90/kg. It had also offered subsidies totalling RM729.4 mil under the Keluarga Malaysia Price Control Scheme implemented on Feb 5.

However, it was reported only RM50 mil in subsidies have been given out to companies, many of which are small businesses due to lack of interests.

To ensure the stability of chicken and egg prices, the Government has set a retail ceiling price for standard chickens and grades A, B and C eggs from Feb 5 to June 5. The subsidies given to poultry farmers are at 60 sen/kg of chicken and 5 sen each for all types of chicken egg categories.

The purposed of the subsidy is to reduce the burden of farmers due to the increase in material costs especially the cost of feed which covers 70% of production costs. At the point of writing, the government gave no clue whether these price ceilings will be extended beyond the said date.

Apart from higher food prices, expensive transport costs will also add pressures to May’s consumer prices which we project to cross the 3% level due to higher average retail fuel prices.

We have seen the price of RON97 increasing from RM3.00/litre in early January this year to RM4.33/litre for the week ended May 19-25.

So far, the average fuel price this month has risen by 22% to RM2.78/litre vs RM2.27/litre in May last year. That translates to approximately 51 sen higher than a year ago or 16 sen more than April 2022 in line with global oil prices.

With 4M 2022 consumer prices at 2.2% yoy and increasing inflation prospect in the months ahead, we made no change to our 2022 CPI forecast at 2.8% yoy. – May 26, 2022

https://focusmalaysia.my/inflation-bites-malaysians-to-brace-for-spiralling-living-cost-in-coming-days/