Malaysia still in deflation as CPI drops

According to DoSM, the June CPI dropped to 119.1 against 121.4 recorded last year


MALAYSIA remained in deflation in June as the Consumer Price Index (CPI) declined 1.9% year-on-year due to the decline in the transport sector.

According to data from the Department of Statistics Malaysia (DoSM) yesterday, the CPI — which measures the country’s inflationary level — dropped to 119.1 against 121.4 recorded in June last year.

“The decrease in the overall index was driven by the decline in transport (-14.3%), housing, water, electricity, gas and other fuels (-2.6%), clothing and footwear (-1.1%), and furnishings, household equipment and routine household maintenance (-0.2%), which contributed 45.7% to the overall weight,” said chief statistician Datuk Seri Dr Mohd Uzir Mahidin in a statement yesterday.

Food and non-alcoholic beverage component continued to increase in June by 1.6% to 134.9 versus 132.8 last year, and contributed 29.5% of CPI weight. Similarly, miscellaneous goods and services also rose 3%, followed by communication (1.6%), health (1.1%) and education (0.8%).

The core index rose 1.2% in June influenced by the increase in miscellaneous goods and services (3%), communication (1.6%), and housing, water, electricity, gas and other fuels (1.4%).

On a monthly basis, the index increased by 1% against May 2020, attributed by a 7.8% increase in transport, food and non-alcoholic beverage (0.4%), miscellaneous goods and services (0.4%), furnishings, household equipment and routine household maintenance (0.1%), alcoholic beverages and tobacco (0.1%), and health (0.1%).

The data also revealed CPI without fuel stood at a positive rate of 0.2% in June compared to 0.1% in May 2020.

CPI fell 0.2% as fuel costs fell in line with the drop in global oil prices. The index further slipped 2.9% in April and May, which was the lowest rate of change since 2010.

“Meanwhile, CPI in the second quarter of 2020 (2Q20) decreased 2.6% to 118.2 compared to 121.3 in the same quarter of the previous year. On a quarterly basis, the CPI decreased 3% compared to 1Q20.”

The index for all states dropped between -1.3% and -2.7% in June led by Sabah and Labuan (-2.7%), followed by Sarawak (-2.6%) and Melaka (-2.6%).

All states, however, registered an increase in the index of food and non-alcoholic beverage, with Selangor and Putrajaya recording the highest increase by 2.5%, followed by Pahang (2.4%), Perak (2.2%), Johor (2%), Pulau Pinang (1.9%) and Negri Sembilan (1.7%).

DoSM also revealed on Tuesday that the country’s gross fixed capital formation (GFCF) posted a negative growth of 2.1% last year against 1.4% in 2018 due to lower acquisition of fixed assets in the manufacturing, as well as mining and quarrying sectors.

GFCF is the second-largest component in the GDP with 23.1%.

“In 2019, Malaysia’s GFCF at current prices recorded RM346.8 billion with a decrease of RM3.5 billion in 2018, and GFCF at constant prices amounted to RM328.4 billion,” said Mohd Uzir.

He said investment in the manufacturing sector contracted to 10.1% last year from 2.6% in 2018 due to the decline of 16.9% in petroleum, chemical, rubber and plastic products.

Electrical, electronics and optical products, as well as transport equipment also dragged the overall performance of the sector by contracting 6.8% last year compared to a contraction of 2.5% a year prior, whereas non-metallic mineral products contracted 7.4%, while basic metal and fabricated metal products, along with textiles and wood products, declined 7.6%. Services sector eased to 1.5% last year versus 5.5% in 2018 due to slower performance in finance, insurance, real estate and business services.

“In 2019, the mining and quarrying sector improved to -9.1% from a negative growth of -11% in the preceding year. The construction sector decreased 1.4% compared to 4.3% in 2018.”

As for the agriculture sector, it posted a growth of 0.2% last year compared to a contraction of 1.8% in 2019 due to a positive growth in livestock and fishing by 5.3%.

He added that the private sector, which contributed 72.8% into the GFCF, was the main impetus for Malaysia’s investment with a growth of 1.6%. The public sector, however, recorded a smaller portion by contributing 27.2%.

The services and manufacturing activities were the main drivers in GFCF of the private sector, where the share of services activities contributed 61.5% in 2019 compared to 58.4% in 2018.

“GFCF of the public sector was largely dominated by services, and mining and quarrying activities with a share of 77.5% and 13.9% respectively. Meanwhile, manufacturing activities registered a share of 8% against 8.7% in 2018,” added Mohd Uzir.