Malaysia inflation down 0.4% in February

Lower fuel pump prices and high year-ago base effects weighed on the CPI.

Malaysia’s consumer price index (CPI) contracted for the second month by -0.4% YoY in February from -0.7% YoY in January, primarily due to the temporary factors of lower fuel pump prices and high year-ago base effects.

UOB reported that transport prices declined for the fourth month by -6.8% YoY, reflecting cheaper fuel pump prices. Other components that further weighed on CPI growth last month were communication, clothing & footwear, recreation services & culture, and miscellaneous goods & services segments, largely due to the base effects following the tax policy changes in 2H 2018.

Meanwhile, food price inflation maintained at 1.0% YoY amidst the implementation of the Festive Season Price-Controlled Scheme during Chinese New Year in early February. The same goes for housing and utilities price inflation which was steady at 2.0% YoY for four months in a row.

UOB senior economist Julia Goh commented, “We expect headline inflation to revert back up once the high base effect in the transport component recedes and the targeted fuel mechanism is introduced in H2 2019.”

There will be no further reduction in broadband prices this year as the target of doubling the speed and halving the price was achieved in H2 2018, she added.