Friday, February 22, 2013

January 2012 Consumer Inflation: Watch Out

Released along with the national accounts data on Wednesday, consumer inflation barely merited much mention. Not that the headline numbers are terribly out of line with recent history (log annual and monthly changes):


Headline inflation ticked up to 1.3% and the CPI recorded the first increase in the overall price level in three months.

On a monthly basis core inflation (ex-food, ex-transport) is right within its normal range, but the Pain index (food and transport) rose 0.7% in January, which is very nearly at the top of its range for the whole of the past decade – ouch.

You can put all the blame on food prices here, as transportation costs actually fell in January (log annual and monthly changes):


So, are we looking at another up cycle in price increases? I think so, though it won’t be reflected in the headline numbers for a few months yet. Annual inflation below 2.5%-3.0% is unusual for Malaysia (the trend rate since 2000 is about 2.6%), and I think the November/December numbers was about as low as it will go.

If you’re looking for rationales, sustained domestic demand and a better external environment should boost demand for consumables, especially food, which should lead to global price increases relative to last year.

There’s also the base effect to consider, as index levels flatlined for four months in a row to begin last year – any increase in prices this year would thus be magnified.

Technical Notes:

January 2013 Consumer Price Index report from the Department of Statistics

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