Malaysia’s Producer Prices Rise in July, Water Supply Costs Surge by 9%

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Malaysia’s Producer Price Index (PPI) registered a year-on-year increase of 1.3% in July 2024, according to the latest data, marking a continued rise in cost pressures across the country. Although this is a slight slowdown compared to the 1.6% year-on-year rise recorded in June 2024, the increase indicates that local producers are still grappling with elevated production costs.

Water Supply Sector Sees Significant Surge in Costs

Among the various sectors, the water supply industry faced the sharpest rise, with the PPI surging by a staggering 9.0% year-on-year. This significant increase underscores the growing financial strain within the sector as it battles escalating costs.

Moderation in Mining Sector PPI Amidst Crude Petroleum Deceleration

In contrast, the mining sector experienced a moderation in its PPI inflation, which slowed to 2.2% year-on-year from June’s 4.6%. The deceleration was largely attributed to a slowdown in the extraction of crude petroleum, signaling a possible easing of cost pressures within this critical industry.

Manufacturing Sector Marginally Up, Led by Electronics

The manufacturing sector saw a marginal rise of 0.9% year-on-year, driven primarily by a 7.0% increase in costs associated with the manufacture of computer, electronic, and optical products. This uptick highlights the ongoing challenges faced by manufacturers as they navigate fluctuating costs in key areas of production.

Month-on-Month Deflation Signals Slight Easing in Cost Pressures

On a month-to-month basis, the PPI recorded a deflation of -0.2%, offering a slight reprieve from the ongoing cost pressures. Declines in the manufacturing PPI by -0.3% and in the electricity and gas supply by -0.8% contributed to this monthly deflation, indicating that some sectors are beginning to see a moderation in price increases.

“With the PPI inflation continues to be lower than CPI inflation, we believe the pressures to pass cost increases to customers are still under control. Nevertheless, the sustained rise in PPI suggests local producers are gradually facing increasing production costs, particularly affected by the elevated commodity prices,” says MIDF.