Consumer sentiment index at 21-year high

Zero-rating of GST lifts spending

PETALING JAYA: Malaysia’s consumer sentiment index (CSI) has risen to a 21-year high at 132.9 points following the 14th General Election (GE14).

The sudden rise is due to the Pakatan Harapan government’s move to zerorise and abolish the goods and services tax (GST) pursuant to winning GE14, along with the sound economic environment, a report by MIDF Research said.

“Apart from GST, stable retail fuel prices will keep inflationary pressure at a low level and thus supporting domestic demand,” the research house said in its report yesterday.

It also noted a survey that was conducted by Nielsen Malaysia showed 82% of Malaysian consumers are optimistic about the country’s economic outlook and perceive the zero-rated GST will benefit consumers.

Consumer sentiment in the country had been firmly below the optimistic level of 100 points mainly due to the effects of the 2014’s oil price plunge and the subsidy rationalisa- tion programme.

MIDF Research said the CSI was mainly dragged by the slowdown in economic growth while the GST had put downward pressure only for a short period of time.

Moving forward, MIDF Research said the country’s inflation is expected to continue to taper down in upcoming months due to higher base effects besides other significant events such as zero-rated GST, the tax holiday period until SST implementation in Sept 2018 and the stable retail fuel price which will reduce business costs.

Headline inflation rate slowed to 0.8% year-on-year (y-o-y) in June 2018, and it is at the lowest level since Mar 2015 due mainly to the three months tax holiday period which kicked off in June 2018.

“Prices went down sharply for clothing & footwear, communication and recreation services & culture, among others. In contrast, inflation accelerated at a faster pace for transport at 5.5% y-o-y, the second highest so far this year,” it said.

Inflation contracted by 1.2% in June 2018 compared to the previous month while core inflation is recorded at 0.1% yoy, far lower than the 1.5% y-o-y in a month earlier.

Commenting on the country’s producer prices that had increased 0.1% y-o-y in June 2018, MIDF Research said the gain was the first growth figure for the year after falling for five consecutive months.

“The gain was driven by mining and electricity and gas supply sectors which rose by 33.1% yoy and 1.3% yoy respectively. In contrast, input prices for agriculture, forestry & fishing, manufacturing and food product declined,” it said.

“Looking ahead, we foresee a slowdown in inflationary pressure amid the tax-holiday period. But rising global commodity prices on top of the sales and services tax comeback in September 2018 could induce inflationary pressures which will eventually affect domestic inflation,” it added.