KUALA LUMPUR (Aug 1): AmBank Research expects the Malaysian Producer Price Index (PPI) to continue rising at a moderate pace after the PPI grew at single digit for the fourth straight month.

In an economic update today, AmBank group chief economist Anthony Dass said that in June, the PPI rose 6.4% year-on-year (y-o-y) bringing the 1H2017 average to 8.7% y-o-y.

“We found cost pressure to have eased in June due to lower input prices from manufacturing (+6.6% y-o-y), electricity and gas supply cost (+0.8% y-o-y) and water supply cost (-0.7% y-o-y),” he said.

Dass explained that with the ringgit presenting a firmer outlook against the US Dollar, added with stable commodity prices, he expects the PPI to continue rising at a moderate pace.

“Businesses are likely to soften their strategy to transfer prices either partially or fully.

“That should provide some breathing space to the upward trajectory of consumer price (CPI).

“We reiterate our 3.8% – 4.0% CPI projection for 2017 and no change to the 3.00% OPR in 2017 with a 45% chance for the OPR to be raised by 25 basis points in 4Q2017,” he said.