KUALA LUMPUR, March 28 — MIDF Amanah Investment Bank Bhd (MIDF) believes businesses are unlikely to pass on price pressures to consumers, as producer price Index (PPI) inflation remains below consumer price index (CPI) inflation.
CPI inflation remained modest at +1.5 per cent year-on-year (yoy) in February 2025, suggesting that higher production costs have yet to significantly impact consumer prices.
However, MIDF noted that government measures such as subsidy cuts, a higher minimum wage, and rising utility costs could add to inflationary pressures in Malaysia.
“Potential policy delays, particularly in subsidy rationalisation, could help keep inflation low and stable,” it said in its Economic Brief note today.
Malaysia’s producer prices rose for the third consecutive month but at a slower pace, with PPI inflation easing to +0.3 per cent yoy in February 2025 from +0.8 per cent yoy in January 2025. This marked the slowest increase in the current uptrend.
Upward price pressures were partly driven by sustained double-digit growth in the agriculture, forestry, and fishing sector, which moderated to +15.2 per cent yoy in February 2025 from +16.5 per cent yoy in January 2025. This was largely supported by a +26.1 per cent yoy increase in the perennial crops sub-index, reflecting higher prices for key agricultural commodities.
Meanwhile, water supply prices maintained an upward trend but slowed to +2.9 per cent yoy (January 2025: +7.6 per cent yoy). The electricity and gas supply sector and the mining sector saw declines of -0.2 per cent yoy and -9.7 per cent yoy, respectively.
The manufacturing sector remained in deflation for the sixth straight month, though at a softer pace, with prices falling -0.3 per cent yoy in February 2025.
On a monthly basis, PPI inflation rose by +0.1 per cent month-on-month (mom) in February 2025, slowing from +0.3 per cent mom in December 2024.
Key contributors to monthly price increases included a rebound in the agriculture, forestry, and fishing sector (+1.4 per cent mom; January 2025: -3.9 per cent mom), a recovery in electricity and gas supply prices (+0.2 per cent mom; January 2025: -0.4 per cent mom), and continued price gains in the manufacturing sector (+0.3 per cent mom), which held steady from the previous month.
By stage of processing, PPI inflation for crude materials for further processing and intermediate materials, supplies, and components was flat on an annual basis. Meanwhile, the finished goods index edged up +0.7 per cent yoy, driven by a +1.7 per cent yoy increase in the capital equipment index.
— Bernama
