Malaysia

Food pushes monthly inflation up in January

By Lee Wei Lian
February 22, 2012

RHB noted in a report today that the price of food and non-alcoholic beverages accelerated in January due to Chinese New Year. — Reuters file picRHB noted in a report today that the price of food and non-alcoholic beverages accelerated in January due to Chinese New Year. — Reuters file picKUALA LUMPUR, Feb 22 — Inflation grew faster in January as compared with December and November last year due to higher prices for food and non-alcoholic beverages, RHB Research Institute said today.

The Consumer Price Index (CPI) on which inflation figures are based rose 0.3 per cent month-on-month in January this year as compared with 0.1 per cent in December and November last year.

RHB noted in a report today that the price of food and non-alcoholic beverages accelerated by 0.8 per cent in January, which was faster than the 0.3 per cent recorded in December and a return to the high of 0.8 per cent in October, due to the Chinese New Year celebration.

Figures provided by the Department of Statistics show that the subgroups of food which showed significant increases in the CPI during this period were fish and seafood — up 3.6 per cent, vegetables (2.4 per cent), and food products (0.7 per cent).

On a year-on-year basis, however, January’s inflation rate of 2.7 per cent was lower than the three per cent registered in December last year.

“Inflation will likely continue to trend downwards, as a slowing economic growth will likely translate into a slower increase in demand and reduce price pressure,” said RHB.

It warned, however, that upward pressure on inflation could still emerge if oil prices spike due to the Iran sanctions and if the government reduces its subsidies for energy once every six months “according to the plan after the general election.”

The research house also pointed out that there is an upward pressure on wages with the government expected to increase civil servants pay by seven to 13 per cent in 2012.

“The move is likely to prompt traders to take advantage of the situation to raise retail product and services prices given resilient domestic demand,” said RHB. “As a result, the moderation in prices will likely be sticky downward in the immediate term.”

It added that it expects inflation to moderate to an average of 2.8 per cent in 2012, from 3.2 per cent in 2011.

RHB said that with an expected easing of the annual inflation rate, the central bank’s Overnight Policy Rate (OPR) is likely to remain stable for the rest of the year, although there is room for a 25-50 basis points reduction should global economic conditions take a turn for the worse.