MALAYSIA’s producer price index (PPI), which measures price changes of goods at the producer level, fell year-on-year (yoy) by 2.1% in September after seven consecutive months of growth, according to the Department of Statistics Malaysia (DOSM).
MIDF Research’s view:
Cost pressures eased as Malaysia’s PPI inflation recorded a -2.1% decline in Sep-24, marking the first decrease since Jan-24.
The decline was primarily driven by a sharper cooldown in PPI for the mining sector, led by reductions in the producer prices for the extraction of crude petroleum and natural gas as a result of lower commodity prices.
For the record, Brent crude oil dropped by -22.2% yoy to USD71.70pb vis-à-vis Sep-23. At the same time, PPI for the manufacturing sector deflated by -1.5% yoy largely driven by deflation in the manufacture of coke and refined petroleum products.
Meanwhile, PPI for electricity and gas supply eased to +0.3% yoy and PPI for water supply decelerated slightly to +7.8% yoy. Producer prices for agriculture, forestry and fishing, in contrast, inflated faster at +5.8% yoy.
By stage of processing, PPI for crude materials for further processing and intermediate materials, supplies and components fell by -9.5% yoy, and -1.1% yoy, respectively.
PPI inflation for finished goods eased to +1.5% yoy. We opine the deflation of producer prices suggests local production costs are more influenced by external factors such as movement in the commodity prices.
In other words, domestic policy changes pose limited impact on the cost pressures, thus far. We maintain our expectation that selling prices are likely to remain stable given the decline in PPI.
With inflation remains under control, we expect BNM will maintain the current OPR setting. – Oct 29, 2024
Main image: donracks
