Malaysian consumer price inflation came in at 0.2 percent on a year-on-year basis in December, the same as in November. Sequentially, inflation came in at 0.1 percent. For the whole of 2018, the headline inflation came in at 1 percent on a year-on-year basis, a slowdown from 2017’s 3.8 percent. Core inflation eased to 0.4 percent year-on-year in December from November’s 0.5 percent. This implies that underlying price pressures continued to be muted.
The headline figure for December was mainly driven by housing and utilities that contributed 0.49 percentage point. The ‘food and beverages’ component also added to the headline inflation. ‘Transport’ costs provided an offset in December, mainly because of a high base effect. The government has resumed the weekly-managed float for petro; products in order to pass on the benefit of lower crude prices to consumers. With average fuel prices lower by about 11 percent sequentially in the New Year, the ‘transport’ component would be a major drag on inflation in January. If global crude prices continue to be at current levels, the removal of the blanket petrol subsidy in the second quarter of 2019 might have only a modest effect on inflation, noted ANZ in a research report.
Inflation outlook appears benign in the first half of 2019 after which the removal of the blanket petrol subsidy and base effects will come into play, added ANZ.
