Saturday, October 22, 2011

September 2011 CPI: No Relief

Yesterday’s inflation report from the Department of Statistics shows inflation remaining at an elevated level (log annual and monthly changes; 2000=100):


It’s a little higher than most expected though – the annual increase in log terms was a point higher at 3.3% compared to August. Most of the increase came from food (0.5% over August) and surprisingly, clothing and footwear (0.4%). Transport costs on the other hand dropped a full 1.0% on the month.

The hike in clothing prices surprised me – it’s really unusual, especially given that even with this increase, clothing prices in aggregate are a full 15% below the 2000 levels.

For the rest, the pain index (food plus transport costs) accelerated to 4.5% in annual log terms, and the core index continued to grow at a fast pace at an uncomfortably high 2.7%. Month on month numbers slowed however, so we should see the annual growth figures come down soon.

Food inflation’s the one most people will feel though, the items that would really impact those in lower income brackets (log annual and monthly changes; 2000=100):


September’s annual increase is actually the highest recorded for the year at 4.85% – not quite as nasty as 2008, when we had double digit increase across 5 months, but enough for people to notice.

To get an idea of the impact of food on the CPI, here’s a direct comparison of the indexes (index numbers; 2000=100):


Food really jumped in 2008, and unlike petrol costs, never really came back down. The slopes of the indexes don’t differ much since then (the food index is slightly steeper), but really it’s been the sharp rise in beginning in late 2007 that has people feeling the pinch.

I think might play around with alternative weighting schemes this weekend, just to get a feel for the impact on inflation on different income levels. Stay tuned for that.

Technical Notes:

September 2011 Consumer Price Index Report from the Department of Statistics


  1. Pemandu projects 2.8% inflation for this decade?is it likely in view of minimum wage,proposed subsidy rationalisation?

  2. Most of the impact of the minimum wage, subsidy cuts, and the GST (if it ever gets implemented) will result in one time only price increases. They'll take a little time to feed through into the rest of the economy, but shouldn't raise underlying trend inflation much.

    The 2.8% "projection" is nothing more than Malaysia's average inflation over the last 30-40 years, so I'd take it for what it is - some consultant's idea of a forecast.

  3. taken over a 10 year period that once off spike will surely increase average compounded from 36% to 65%.The subsidies itself is abt 2% of GDP.

  4. Not sure what you mean. If you look at it graphically, one off spikes don't raise the rate of increase (i.e. the slope of the price level over time), just a change in the intercept.