January Inflation Lower Than Expectation

Technorati Tags : Malaysia inflation, CPI

Source: Citigroup Malaysia Economic Flash

CPI inflation edged down slightly to 2.3% in January, from a ten month high of 2.4% in December. This was slightly lower than market expectation of 2.4%. Lower CPI inflation was largely attributable to a fall in clothing and footwear (-1.4%) prices, as well as slower price increases in food and beverages (Jan: 3.9%, Dec 4.2%) and transport (Jan: 1.0%, Dec: 1.3%)

We expect CPI inflation to head north in the coming months. Global food supply disruptions and structural increase in demand have contributed to food price increases globally. Price controls have led to shortages of common food items such as flour and cooking oil in Malaysia. A National Price Council has already been established to stabilize prices and ensure sufficient supplies of essential goods through a national stockpile. A 10-15% hike in petrol and diesel prices seems likely after elections on March 8, which will raise CPI inflation by 0.5-1%-pts. CPI inflation should average 2.8% in 2008, up from 2% in 2007.

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