KUALA LUMPUR (Jan 2): AmBank Group Research said Malaysia’s producer price index (PPI) in November 2017 rose 4.3% year-on-year (y-o-y), bringing its 11-month average to 7.3%.

In a note today, AmBank group chief economist and head of research Anthony Dass said the data suggests the PPI had peaked in July and is on a softening trend.

He said the slower gain in the PPI is partly due to a moderate increase in the cost of intermediate inputs which rose by 2.8% y-o-y in November from 4.9% y-o-y in October and that could be due to the stronger ringgit (MYR) against the US Dollar (USD), hence helping to ease the cost of imports.

Meanwhile, he said the cost of crude materials and finished goods grew firmer by 13.6% y-o-y and 0.3% y-o-y in November respectively.

“We believe the overall cost of doing business is gradually becoming more contained.

“With the MYR showing signs of a firmer outlook in 2018 against the USD, coupled with stable commodity prices, we expect the PPI to continue rising at a moderate pace,” he said.  

Dass said he expects the impact of the high base to slow the gain of the PPI reading in the coming months.

“We project our headline consumer price index and PPI to average around 4.0% and 7.3% respectively in 2017 and 2.5%/3.0% respectively in 2018.

“In the meantime, we still expect Bank Negara Malaysia to raise the current OPR of 3.00% by 25 basis points in January underpinned by a growing demand-pull inflation. We expect the OPR to normalise at 3.50%,” he said.