Malaysia: Consumer Confidence Boosted as Inflation Hits 3-Year Low

In a positive turn of events, the headline inflation rate reached a close-to-3-year low at +1.8% in October 2023, a figure below the market consensus of +1.9% and the lowest since March 2021. This downward trend in inflation, both in headline and core rates, signifies favorable conditions for consumer demand.

The core inflation rate recorded a decrease to +2.4% year on year, still above the pre-pandemic average of +1.7%. The softening inflationary pressure is seen as a positive signal for domestic demand, expected to stay on an expansionary path in the fourth quarter of 2023 and beyond.

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Global Food Inflation Sustains Deflationary Trend

Consumer Confidence

Global food inflation has continued its deflationary trend, marking 12 consecutive months of contraction with a year-on-year rate of -10.9% in October 2023. On a consequential month-to-month basis, global food inflation declined by -0.5%, following a -0.2% contraction in September 2023.

As of the first 10 months of the year, food prices contracted by -14.3% year on year (compared to +14.3% in 2022). Malaysia’s food inflation rate recorded a lower +3.6% year on year, with Food at Home experiencing a more than 2-year low at +2.1% year on year, while Food Away from Home remained at a 17-month low of +5.6% year on year.

2023 Inflation Outlook and Consumer Confidence

With the average food inflation at +5.3% year on year as of the first 10 months of 2023, matching the previous year’s +5.7%, analysts expect the headline inflation to average at +2.7% for the year.

This faster-than-expected moderation in the food inflation rate contributes to the overall prediction, while non-food inflation is anticipated to average at +1.5%. The economic landscape appears to be supportive of continued consumer confidence and economic growth.

Cover Photo: WIKI

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