Saturday March 26, 2011
February inflation up on higher cost of food, transport and utilities
By SHARIDAN M.ALI KUALA LUMPUR: Malaysia's inflation level accelerated by 2.9% in February year-on-year fuelled by higher cost of food, transport and utilities.
This was slightly above Bloomberg economists' median estimates of 2.7% for the period under review.
This latest consumer price index's (CPI) 2.9% rise was higher than the increase of 2.4% and 2.2% recorded in January 2011 and December 2010 respectively.
According to the Department of Statistics, the index for food and non-alcoholic beverages in February rose by 4.7%, transport climbed 4.5%, while housing, water, electricity, gas and other fuels escalated by 1.5%.
Meanwhile, compared with January, the CPI rose by 2.7% on the back of increases observed in all the main groups except clothing and footwear, communication as well as recreation services and culture.
It said other increases included alcoholic beverages and tobacco at 6.4%, restaurants and hotels 5%, health 2.4%, education 1.7%, miscellaneous goods and services 1.3% as well as furnishings, household equipment and routine household maintenance 1.1%.
Rating Agency Malaysia Holdings Bhd group chief economist Dr Yeah Kim Leng said the latest inflation level reflected an accelerated pace over the past two months.
“This is largely due to cost-push factor that is apparent in higher food and energy prices. But compared with the average level of inflation of other countries in the region, our increase is still lower,” he told StarBiz.
“This is because the Government's subsidy has absorb some of the escalations in food and energy prices.”
Nevertheless, if this accelerated trend continued, Yeah said, it would post a concern especially for the lower-income group where the Government was expected to provide assistance.
In relation to interest rates in a cost-push factor phenomenon as opposed to higher demand increase, the pressure for interest rates hike was weaker, he added.
Meanwhile, MIDF Investment Research chief economist Anthony Dass said the rise in inflation was driven by demand due to the high liquidity level in the system that was reflected in the recent 1% hike in the statutory reserve requirement (SRR) and higher food prices.
“Nevertheless, the impact of higher commodity prices has not been fully reflected due to government subsidy,” he said.
He expected the overnight policy rate to increase by another 50 basis points, SRR by another 100 basis points and the ringgit against the US dollar to average at 2.95 this year.
2bz4money: Needed more cash or reduced your expenditures on foods, transportations and utilities.