Economic Growth

Headline inflation as measured by the consumer price index (CPI) came in at 1.8% in December, slightly below consensus expectation of 1.9%. The overall inflation rate for 2016 was the same as 2015’s 2.1%.

The full-year inflation rate falls within the lower end of Bank Negara Malaysia’s (BNM) projection of 2% to 2.5%. For 2017, the central bank anticipates a stable inflation rate due to low global energy and commodity prices, and a generally subdued global inflation.

This is in line with most analysts’ forecast for the overnight policy rate (OPR) to be kept at 3% today after the central bank holds its first Monetary Policy Committee (MPC) meeting for 2017.

In July 2016, BNM slashed the OPR for the first time since 2009 by 25 basis points (bps) to 3% as the central bank sought to stem rising downside risks on the external front amid a low inflationary environment.

Five months later, in December, the CPI was up 1.8%, similar to November after climbing 0.4% from October, according to the Department of Statistics Malaysia (DoS) yesterday.

The DoS said inflation last month was driven by growth in food and non-alcoholic beverages (3.7%), and housing, water, electricity, gas and other fuels (2.1%) but was offset by the decrease in communications by 2.6%, transport (0.6%) and clothing and footwear (0.5%).

The transport group index dipped 0.6% year-on-year after falling 1.5% in November and 5.5% in October 2016.

The DoS said the average price of one litre of RON95 petrol was RM1.90 in December 2016 compared with RM1.95 a year ago.

“As for RON97, the average price declined to RM2.25 in December 2016 from RM2.30 in November 2016. However, the price of RON97 in December 2016 was lower than in December 2015,” it said.

It noted that the rise in the food and non-alcoholic beverages index was fuelled by the food subgroup comprising oils and fats (up 36.9%), fish and seafood (5.6%), vegetables (4.8%) and meat (3%).

As for food away from home, the index continued to rise in December 2016 and showed an increase of 3.5%, the department added.

For 2016, the CPI’s main upward contributor was from food and non-alcoholic beverages, which registered an increase of 3.9%, influenced by food at home which grew 4%, food away from home (3.8%), and coffee, tea, cocoa and non-alcoholic beverages (1.2%).

Among the subgroups of food at home were vegetables (up 6.5%), oils and fats (6.5%), fish and seafood (6.3%), fruits (4.8%) and meat (3.7%).

Housing, water, electricity, gas and other fuels rose 2.4% while alcoholic beverages and tobacco gained 17.2%, followed by miscellaneous goods and services (2.9%), restaurants