Decline in June CPI within expectations - economists
The decline in the Consumer Price Index (CPI) by 1.9 percent in June 2020 from a year earlier is within expectations in light of lower fuel prices, say economists.
Despite the fall, Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said he does not think it is an outright deflation.
“We could still see other prices such as...
The decline in the Consumer Price Index (CPI) by 1.9 percent in June 2020 from a year earlier is within expectations in light of lower fuel prices, say economists.
Despite the fall, Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said he does not think it is an outright deflation.
“We could still see other prices such as food and non-alcoholic beverages recording positive print as food & non-alcoholic beverages continued to increase in June 2020 by 1.6 percent to 134.9 from 132.8 in the corresponding month of the preceding year,” he told Bernama.
Today, the Department of Statistics Malaysia (DOSM) revealed the decrease in the overall index was driven by the decline in transport (-14.3 percent), housing, water, electricity, gas and other fuels (-2.6 percent), clothing and footwear (-1.1 percent) and furnishings, household equipment and routine household maintenance (-0.2 percent) which contributed 45.7 percent to the overall weight.
Chief statistician Mohd Uzir Mahidin said the lower average price of RON95 in June 2020 at RM1.54 per litre, from RM2.08 in June last year, contributed to the decrease of the transport and overall index.
Mohd Afzanizam said the core CPI also increased by 1.2 percent during June 2020 versus the same month last year and in that sense, there is still inflation although it has been very minimal.
“In view of this, Bank Negara Malaysia (BNM) has the monetary policy to prescribe additional monetary easing if they wish to do so.
“Having said that, we are maintaining our call for the OPR at 1.75 percent throughout the year and perhaps in 2021,” he added.
On July 7, BNM reduced the Overnight Policy Rate (OPR) by another 25 basis points to 1.75 percent, a record low since the floor was set in 2004.
Meanwhile, former economist at Malaysian Institute Of Economic Research (MIER) Zakariah Abdul Rashid (photo) said the significant contribution of transportation is expected in the lower June CPI.
He added the dip was predicted as consumers adjust to the new norm.
“The fall is expected as it is adjusting to its normal level, considering the previous two months were rather unusual due to the movement control order,” he said, adding a negative CPI for a longer period is counterproductive.
The CPI declined 2.9 percent in May to 117.9 from 121.4 in the same month last year.
The 2.9 percent drop in the index was similar to that in April 2020 (against April 2019), which was the lowest rate of change since 2010.
He forecast the July CPI would remain negative at around -0.4 percent to -1.0 percent.
- Bernama
