Malaysia’s Producer Price Index (PPI) saw a year-on-year increase of 1.4% in May 2024, down from 1.9% in the previous month, according to the Department of Statistics Malaysia (DoSM). Every month, the PPI for local production decreased by 0.9%, reversing the 0.5% increase recorded in April 2024.
Producer price inflation in Malaysia continued to rise, albeit at a slower pace of 1.4% year-on-year in May 2024, down from a 16-month high of 1.9% in April. This increase suggests rising cost pressures for local companies for the third consecutive month. The moderation in May was primarily due to softer PPI inflation in the agriculture, forestry, and fishing sectors, which saw a decrease from 5.4% year-on-year in April to 1.3% in May. The mining sector also experienced a decline in inflation, dropping from 10% in April to 6.6% in May.
In contrast, manufacturing costs picked up, increasing to 1.0% year-on-year in May from 0.8% in April. This rise aligns with higher prices in electricity and gas supply, which went up from 1.0% in April to 1.5% in May, and water supply, which saw an increase from 7.2% in April to 8.7% in May following a water tariff hike in February 2024.
Currently, PPI inflation remains below the Consumer Price Index (CPI), posing limited pressure to pass on price increases to consumers. However, businesses may raise selling prices following the recent hike in diesel prices. Considering the effect of policy changes such as increases in utility charges, the phased implementation of targeted fuel subsidies, and expectations of moderating food price growth, we maintain our projection that headline CPI inflation will be higher at 2.7% in 2024, compared to 2.5% in 2023.
