PETALING JAYA: Malaysia’s Consumer Price Index (CPI) for July declined 1.3% to to 119.9 from 121.5 in the same month of the preceding year, led by falls in transport (-10.3%), housing, water, electricity, gas & other fuels (-2.6%), clothing & footwear (-0.6%) and furnishings, household equipment & routine household maintenance (-0.1%), which contributed 45.7% to overall weight.
In a statement, Chief Statistician Malaysian Datuk Sri Mohd Uzir Mahidin said, nevertheless, food & non-alcoholic beverages increased 1.4% to 135 from 133.2 in the corresponding month of the preceding year.
“This group contributes 29.5% of CPI weight. Similarly, miscellaneous goods & services inclined by 2%, followed by communication (1.6%), health (1.1%) and education (1.2%).
“The CPI without fuel shows a positive rate of 0.2% in July 2020 compared with June 2020. The CPI without fuel covers all goods and services except RON95, RON97 and diesel,” he said.
The core index rose 1.1% in July 2020 compared with the same month of the previous year.
Although the year-on-year CPI decreased, the index on a monthly basis increased 0.7% compared with June 2020, attributed to transport (4.9%), education (0.4%), furnishings, household equipment & routine household maintenance (0.3%), miscellaneous goods & services (0.3%), food & non-alcoholic beverages (0.1%), alcoholic beverages & tobacco (0.1%) and health (0.1%).
Meanwhile, the CPI for the period of January to July 2020 decreased 0.9% compared with the same period last year. The drop was attributed to transport (-10%), clothing & footwear (-1.1%) and housing, water, electricity, gas & other fuels (-0.7%).
The index for all states decreased between -0.7 and -2.2% in July 2020 compared with July 2019. The highest decrease was recorded by Malacca (-2.2%), followed by Sabah & Labuan (-2.1%), Sarawak (-1.9%) and Kedah & Perlis (-1.9%).
In a note, UOB Research said it expects deflation to continue its easing trend over the next few months as the domestic economy recovers and commodity prices stabilise. As such, it is keeping its full-year CPI projection at -0.5%, with volatile global oil prices a wild card.
“Underlying inflation is also projected to be kept in check and in line with a gradual improvement in domestic demand conditions amid still high unemployment,” it added.
The research house pointed out that despite a cumulative 125 bps cut in the Overnight Policy Rate (OPR) year to date to a new low of 1.75%, another cut in September cannot be ruled out given official remarks regarding the pace of economic recovery, downside risks to growth, and concerns over the impact on borrowers when the loan moratorium ends in September.
Likewise, CGS-CIMB Research expects inflationary pressure to remain subdued for an extended period amid significant slack in the economy and challenging labour market conditions, reflected in a record 17.1% year-on-year contraction in second- quarter 2020.
“This leaves sufficient headroom for a more accommodative monetary policy. We expect Bank Negara Malaysia to lower the OPR by 25 basis points to 1.5% at the next MPC meeting on Sept 10,” it said.
