Food price inflation the highest in 49 months
KUCHING: February headline inflation came in line with analysts expectation at 4.2 per cent, as compared to 3.5 per cent in the previous month but food and nonalcoholic beverages continued with its upward momentum.
MIDF Amanah Investment Bank Bhd’s research arm ( MIDF Research) noted that inflation in February reached 4.2 per cent, the highest level in seven years.
Most of the increase, it said, was due to the low pump price in February last year at RM1.70, which was much closer to the February 2016 pump price at RM1.75.
On the other hand, core CPI increased by 3.6 per cent on year, similar to the previous month.
Food and non- alcoholic beverages continue with its upward momentum, highest in 49 months. FNAB price index rose in February, the highest in seven months, leading to 4.8 per cent inflation on yearly basis, the highest in 49 months.
“We believe that the El Nino and festive season contributed to the increase in the FNAB prices. At the same time, services price index rose while transport price index experienced a contraction by 3.2 per cent on month due to the reduction in RON95 pump price by 10 sen in February,” said MIDF Research.
Among the top 20 most consumed items, fresh vegetables, fi sh and seafood experienced the highest price increase in February by three per cent, 2.3 per cent and 1.8 per cent respectively.
“We believe the significant increases of fresh vegetables were contributed by the El Nino which have hit vegetable farms across the country, particularly at Cameron Highland. We are expecting the vegetable prices will continue to increase in March CPI num-
We believe that the El Nino and festive season contributed to the increase in the FNAB prices. At the same time, services price index rose while transport price index experienced a contraction by 3.2 per cent on month due to the reduction in RON95 pump price by 10 sen in February.
bers.”
Similar with the trend in industrial production index, inflationary pressure is starting to pick up among Asian economies, while major developed economies are also picking up albeit at a slower rate.
“We believe most of the rebound was due to the recovery in commodity prices, although we doubt that the momentum would continue for a longer period. In addition, there is yet any sign of recovery in the global demand and manufacturing activities, making the increase in inflationary pressure as modest at best,” added the research house.
The increase in inflation rate for most countries is likely to push Fed to continue with its monetary policy normalisation plan, with the first hike for this year to be conducted in June 2016 by 25 basis points.
However, due to the sluggish global demand and lower disposable income domestically, the research house maintain its expectation for OPR to be cut by 25 basis points in the second half of 2016.
Due to the rebound in the oil price recently, BNM has upgraded their infl ation forecast to 2.5- 3.5 per cent interval.
“Given current economic conditions, we perceive there is limited room for the oil price to swing upward. Thus, we are maintaining with our forecast for the inflation rate to come at 2.6 per cent FY15. At the same time, we are expecting inflation rate for March 2016 to be at 2.7 per cent due to the lower pump price for the month.
“From our estimate, we opine that price of RON95 is likely to be set at RM1.60-1.65 for the month of April.”
MIDF Research