Thursday, January 23, 2014

December 2013 Consumer Prices

Consumer prices rose 3.2% in log terms in December (log annual and monthly changes; 2000=100):


There’s no doubt that the headline rate will continue to be much higher than the norm we’ve seen over the past year – the petrol price hike in September has permanently raised the price level, and that will feed through into the economy over the next year.

The more interesting question is, are there second order effects (acceleration, not just a one time jump, in price increases)? And will this prompt a policy response from Bank Negara?

For the moment, the answer appears to be no, and no. Looking at the monthly price changes, it looks as if the shock to the economy is already settling down. There has been some feed through into other prices, but so far its still a one time jump in the price level, not a change in its slope – indeed, core prices have begun to flatten out (index numbers; 2000=100):


Just bear in mind that the toll road revision hasn’t been confirmed yet, and the electricity tariff hikes are due this month.

But getting back to the December numbers, the entire impetus for price increases in December boils down to one category: food (log annual and monthly changes; 2000=100):


Food prices rose nearly 1% in log terms on the month in December. There’s some hope that this will be a temporary acceleration – it looks like food price hikes are common just before CNY and Eid-il Fitri, and fall back to zero just after.

The other increase in prices to note is that of Recreation, which rose even faster than food prices in December (1.2% in log terms). Quite a few categories saw price drops (clothing, furniture, cars), but not enough to offset the jump in food prices.

Nevertheless, the base effect will ensure that y-o-y price changes will remain above 3.0% for January (and for much of the rest of the year), as will the coming hike in electricity rates and the annual revision in school fees.

Technical Notes:

December 2013 Consumer Price Index report from the Department of Statistics

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