Consumer price index marks first annual fall in over two decades

Thursday July 23, 2009

By LAALITHA HUNT

PETALING JAYA: Malaysia’s consumer price index (CPI), the measure of the country’s inflation, declined 1.4% year-on-year in June, the first annual decline in over two decades.

The decline was due to the high base effect from last year’s fuel price hike, the department of statistics said yesterday.

This is the first annual fall in the CPI since August 1986, according to foreign media reports.

However, the CPI increased 0.1% in June from May, which saw a 2.4% rise.

The index for food and non-alcoholic beverages in June increased 3.4% from a year earlier, while the index for non-food items decreased by 3.7%, the statistics department said.

The CPI from January to June increased 2.5% to 111.7 compared to the previous corresponding period.

The index for food and non- alcoholic beverages as well as non-food increased by 7.2% and 0.2% respectively in the six-month period.

Kenanga Investment Bank Bhd economist Wan Suhaimi Saidi said the decline in June was temporary and would not affect the country’s monetary policy.

“We expect CPI to normalise to positive territory by the end of this year with the likely increase in electricity tariffs and upward fuel price adjustments soon,” he said.

RAM Holdings Bhd chief economist Dr Yeah Kim Leng concurred that deflation was likely to be temporary due to rising commodity prices such as crude oil.

He cautioned that a liquidity-driven, instead of demand-driven rise in crude oil prices, could lift prices and harm economic recovery.


The full report from the Department