AmBank Research expects Malaysia PPI to stay weak

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KUALA LUMPUR (Jan 2): AmBank Research expects the Malaysian producer price index (PPI) figures to remain under negative growth pressure at least in the early months of 2019.

In a note today, AmBank group chief economist and head of research Dr Anthony Dass said he foresees headline consumer inflation hovering around 1.1% year-on-year (y-o-y) in 2018 and 1.5% y-o-y in 2019.

Dass, who is also adjunct professor in economics at University of New England, Sydney, Australia, thus reiterated his view that the overnight policy rate in 2019 will remain at 3.25%.

Dass said the factory-gate inflation fell in November by 2.9%, bringing the first 11 months of 2018 average to -0.9% y-o-y, due to cooling domestic demand for raw materials and ebbing manufacturing activity, underscoring rising economic pressure coming from external challenges and also to some extent, domestic pressures.

Dass said looking at the various stages of processing, the sub components of the PPI registered declines across the board. Crude materials, intermediate materials and finished goods all fell in November at -6.9% y-o-y, -1.5% y-o-y, and -2.6% y-o-y, respectively.

"With the PPI figures expected to remain under negative growth pressure at least in the early months of 2019, we foresee limited upside on headline consumer inflation.

"For 2018, we project the headline consumer inflation to hover around 1.1% y-o-y and 1.5% y-o-y in 2019," he said.