Inflation in Malaysia remains well below the norm as consumer prices in March edged up a bit by 1.6% (log annual and monthly changes):
Much of it was driven – at least on an annual basis – from higher transportation costs, as non-food and transport prices edged downwards.
On a month-to-month basis however, overall food prices did not budge from January while transport prices only moved up about 0.6%. The other price movers were funnily enough, furniture and fittings (0.4%) and restaurants (0.4%). That explains the steeper m-o-m increase in core prices over increase in the pain index. Nevertheless, it looks like the expected increase in inflation is beginning to take off.
We’re still some ways off from the 2%-3% average inflation that BNM has forecasted – it looks increasingly likely that at best, we’ll see the lower end of that range, and at worst we’re likely to see the forecast overshoot actual inflation.
If you’re wondering why I’m calling low inflation bad, it goes back to one fundamental economic truism and one market observation – higher inflation is a sign of an economy close to its potential output and/or higher commodity prices. Either or both would be positives for the Malaysian economy. The latter especially boosts rural incomes (and exports) and helps reduce inequality. Malaysia’s long term average rate of inflation is just under 3% (the exact figure depends on the sample period you use).
March 2013 Consumer Price Index report from the Department of Statistics