Malaysia: Inflation loses traction in June – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the latest inflation figures in the Malaysian economy.

Key Takeaways

“Consumer price index (CPI) posted a smaller gain of 3.4% y/y in Jun (May: +4.4%), a tad lower than our estimate and Bloomberg consensus of 3.5%. Year-ago high base effects and the impact of a nationwide lockdown on demand for selected food and non-essential goods and services (i.e. clothing & footwear, personal care & effects, and air flight) were among factors pulling down headline inflation last month, amid the continuation of government relief measures (i.e. electricity bill discounts and car sales tax exemption).”

“We expect inflation to hover around 3.0% through 2H21, bringing the full-year CPI growth to an average of 2.5% for 2021, which is lower than our previous forecast of 3.0% (BNM forecast: 2.5%-4.0%; 2020: -1.2%). This is primarily based on our current average Brent crude oil price assumption of USD70/bbl for this year, expectation of a gradual re-opening of the economy by 3Q21, and the extension of most government relief measures under the PEMULIH aid package that was announced on 28 Jun. It also takes into account smaller inflation outturns than we had projected over the past three months.”