Malaysia’s inflation rate rose faster than expected in November,
advancing by 1.8% from a year ago, due to higher food prices (Star, November inflation
exceeds forecasts on higher food prices, 2016). Based on a
seasonally adjusted terms, the overall CPI for November 2016 increased by 1% as
compared to October 2016. November’s CPI rose at higher rate of 1.8% from a
year ago due to 3.8% rise in the indices for food and non-alcoholic beverage
and housing, water, electricity, gas and other fuels (increased by 2.1%).
Retail inflation in Malaysia, as
measured by the CPI (consumer price index), surprised in November because it
rose at a faster pace forecasted. The CPI inflation increased at a 1.8% in November
compared to a 1.4% in October. The main reason of inflation, which demolish volatile
items like fresh food, and price-controlled goods and services, increased by 2.2%
in November compared to November 2015.
A sharp uptick in the food and
non-alcoholic beverages main group, was the rise leading cause, which saw
prices surging by 3.8% year-on-year in November as compared to 2.5% in the
previous month. The food and non-alcoholic beverages main group has the highest
weight in the overall CPI, forming 30.2% of the index.
The housing, water, electricity, gas,
and other fuels main group, which forms 23.8% of the CPI, increased by 2.1% in
November, which shows no difference from the previous month.
On the other hand, sub-indices for
communication, transport, and clothing & footwear offset the rise by other
main groups. These indices saw a contraction of 2.7%, 1.5%, and 0.5%
respectively, in November. While communication, clothing and footwear had seen
a decline by a similar pace in the previous month as well, the pace of decline
in the transport category fell as it had seen prices fall by 5.5% year-on-year
The rise in food and non-alcoholic
beverages was led by a surge in prices of the oils and fats category. The
subgroup saw a 36.6% surge in prices in November, compared to 0.3% in the
October. Cooking oil led the surge among oils and fats, rising by 45.6%. Prices
of meat rose by 6%, after having risen by 2.4% in October. The category was led
by prices of chicken, which rose 10%. Vegetable prices surged as well, rising
by 3.6% in the month. Prices had actually contracted by 1.1% in October.
Malaysia’s central bank, the Bank Negara Malaysia, has kept its overnight
policy rate at 3.00%; the rate had last seen reduced by 25 in July to stimulate
the economy. A rate cut also stokes inflationary pressures. The Malaysian
government expects the economy to grow in the 4% to 4.5% range in 2016, while
inflation is expected to be in the two percent to three percent range in 2016.