Malaysia stays in deflation, CPI falls 2.9%

Food and non-alcoholic beverage continue to increase by 1.2% in May and the index contributes 29.5% of CPI weight


MALAYSIA’S Consumer Price Index (CPI) declined 2.9% year-on-year in May 2020, unchanged from April 2020 and leaving the nation in deflation for a third straight month.

According to data from the Department of Statistics Malaysia (DoSM), the CPI, which measures the country’s inflationary level, fell to 117.9 from 121.4 in May last year.

It slipped 2.9% in April — the lowest rate of change since 2010 — and 0.2% in March, after rising 1.3% in February.

“The decrease in the overall index was driven by the decline of transport (-20.8%); housing, water, electricity, gas and other fuels (-2.6%); clothing & footwear (-1.1%); and furnishings, household equipment and routine household maintenance (-0.2%) which contributed to 45.7% of overall weight,” DoSM chief statistician Datuk Seri Dr Mohd Uzir Mahidin said in a statement yesterday.

Economists surveyed by Bloomberg had forecast an average 2.8% decline for May.

The transport index was mainly dragged by the lower average price of RON95 in April 2020, which stood at RM1.30 per litre versus RM2.08 in May 2019, subsequently dragging the overall inflation rate.

The average price of RON97 also decreased to RM1.60 per litre compared to RM2.74 previously while diesel declined to RM1.45 per litre from RM2.18 last year.

This came as the average price of Brent crude oil contracted 53.8% on-year in May, after plunging 59.8% in April.

Food and non-alcoholic beverage continued to increase by 1.2% to 134.3 during May, against 132.7 a year ago. The index contributes 29.5% of CPI weight.

Miscellaneous goods and services rose 2.8%, followed by communication (1.6%), health (1.2%) and education (1%).

Meanwhile, the core index rose 1.1%, influenced by miscellaneous goods and services (2.8%), communication (1.6%) and housing, water, electricity, gas and other fuels (1.4%). The core index excludes most volatile items of fresh food and administered prices of goods and services.

On a monthly basis, inflation climbed 0.3% against April 2020, driven by transport (1.0%), miscellaneous goods and services (0.5%), food and non-alcoholic beverages (0.3%), restaurants and hotels (0.1%) and alcoholic beverages and tobacco (0.1%).

For the period of January to May 2020, the CPI decreased 0.7%, due to transport (-9.1%) and clothing and footwear (-1.2%).

The index for all states shrank by between 1.9% and 3.8% during May, led by Sarawak (-3.8%) and followed by Kelantan (-3.7%) and Kedah and Perlis (-3.7%).

However, all states registered an increase in the food and non-alcoholic beverage index.

The biggest expansions were recorded by Selangor and Putrajaya (2.1%), Perak (1.8%), Penang (1.7%) and Johor (1.3%), all of which surpassed the national index of 1.2% for food and non-alcoholic beverage in May 2020.

MIDF Investment Bank Bhd projects a deflation rate of -0.5% this year for Malaysia, as prices of utilities continue to decline under government initiatives to combat the effects of the Covid-19 pandemic, and volatile global crude oil prices continue to influence fuel-related components.

“Consumers are trending away from discretionary to necessity, avoiding most purchases of non-food items such as clothing and furniture. This trend is likely to continue for a substantial period of time as concerns over future personal finances persist,” it wrote in a note yesterday.

Bank Negara Malaysia said that last month’s average headline inflation is likely to turn negative in 2020.