Malaysia: Inflation eases to 5-month low – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the latest inflation figures in the Malaysian economy.

Key Takeaways

“Headline inflation dipped for the third straight month to a 5-month low of 2.2% y/y in Jul (Jun: +3.4% y/y). It moderated at a faster pace than our estimate (2.9%) and Bloomberg consensus (2.9%). The extension of government relief measures particularly electricity bill discounts and the impact of a prolonged pandemic-led lockdown on demand for non-essential goods & services (i.e. household equipment & maintenance, air flight, education, and personal care & effects) amid steady food prices were the main reasons behind the slowdown in headline inflation last month.”

“We keep our view that inflation will continue to stabilise towards year-end as transitory price effects start to abate. In addition, the lingering pandemic uncertainty would cast a shadow on the outlook for demand and wages. Continued government relief measures such as electricity bill discounts and passenger vehicle sales tax exemptions will also help keep inflation in check. We retain our 2021 full-year inflation forecast at 2.5% (BNM’s forecast: 2.0%-3.0%).”