Malaysia’s Producer Prices See Slower Growth in May Amid Sectoral Variations

Malaysia’s Producer Price Index (PPI) saw a year-on-year increase of 1.4% in May 2024, down from 1.9% in April, according to the Department of Statistics Malaysia (DoSM). On a monthly basis, the PPI for local production decreased by 0.9%, reversing April’s 0.5% rise.

The moderation in PPI inflation was largely due to softer price increases in the agriculture, forestry, and fishing sectors (+1.3% in May compared to +5.4% in April) and the mining sector (+6.6% in May compared to +10% in April).

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Malaysia’s Producer Prices

Conversely, manufacturing costs rose to +1.0% year-on-year, up from +0.8% in April, driven by higher electricity and gas supply prices (+1.5% in May compared to +1.0% in April) and water supply costs (+8.7% in May compared to +7.2% in April) following a water tariff hike in February.

Despite the moderation, the increase in producer prices suggests rising cost pressures for local companies for the third consecutive month. However, PPI inflation remains below the Consumer Price Index (CPI), indicating limited immediate pressure to pass these costs onto consumers. Nonetheless, businesses may raise selling prices following recent diesel price hikes.

Considering these factors, it is projected that headline CPI inflation will rise to 2.7% in 2024, up from 2.5% in 2023, driven by policy changes such as utility charge increases, phased fuel subsidy implementations, and expectations of moderating food price growth.