Higher inflation

THE already high cost of living is about to get higher in the coming months and Malaysians should brace themselves for it.

Why? Crude oil prices are rising. From June 21, when prices were at the lowest for the year, to Sept 14, Brent, the global benchmark, has jumped 21.56% while the US benchmark WTI has risen 16.13%.

When crude oil prices broke the US$50 a barrel level late last year and into this year, consumers felt the pinch. Headline inflation was at its highest led by transportation and fuel costs in March before tapering off as oil prices dropped into a trading range in the low to mid-US$40s.

Brent has gone back to above US$50 and should WTI break above the US$50 level, there is a possibility it will go back to the mid-US$50 trading levels. Transportation and fuel costs will rise in tandem and this will have a spillover effect on other prices.

Because of the high-base effect (inflation was rising late last year into this year), it looks like inflation is moderating when comparisons are made. But when volatile fuel and food prices are stripped off from the consumer price index, core inflation, which reflects the prevalence of inflation, is actually rising.

The grouses of consumers, despite the best efforts of policymakers to explain, are real where prices are concerned. The high cost of living, coupled with low wages, will mean that households that spend the better portion of their income on necessities such as food, housing and transportation, will feel the impact even more.

The economy looks like growing at a healthy pace this year versus the doom-andgloom at the beginning of the year. But the growth rate is not reflected in consumer sentiment.

Will the unexpectedly good performance of the economy this year reflect in the wages of ordinary wage earners in the coming year? Because it is of no use to say that the economy is growing when the benefits do not trickle down to wage earners.