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This article first appeared in The Edge Financial Daily on August 1, 2018

KUALA LUMPUR: Malaysia’s producer price index (PPI) rose for the first time this year, rising 0.1% year-on-year (y-o-y) in June 2018 due to increases in the mining segment besides the electricity and gas supply portion of the PPI.

The Department of Statistics Malaysia (DoS) said yesterday the PPI’s mining segment increased 33.1%, while the electricity and gas supply portion climbed 1.3%.

“Meanwhile, the sectors that registered decreases were agriculture, forestry and fishing (-10.1%), manufacturing (-2.0%) and water supply (-0.2%),” the DoS said in its press release.

On a monthly basis, the PPI for local production fell 0.7% in June 2018.

The PPI’s 0.1% y-o-y rise in June followed a 0.4% decrease in May.

“Despite the tepid gain, it is still notable as the first growth for this year after falling for five consecutive months,” said MIDF Research in a note yesterday.

It added that it foresees a slowdown in inflationary pressure amid the tax-holiday period following the zero-rated goods and services tax in May.

On the other hand, rising global commodity prices, on top of the sales and services tax comeback in September, could induce inflationary pressure which eventually affects domestic inflation.

“Producer inflation of 0.1% y-o-y which remains low would possibly provide support for industrial and business activities in the upcoming months. Other factors such as the tax-holiday period and fuel subsidisation could lessen input cost pressure and indirectly support industrial production,” it said.

MIDF Research has forecast the PPI to rise 3.2% for the full year, on the back of a higher base effect.

“We anticipate inflationary pressure from fuel-related items to pick up at steady speed, in tandem with a steady, gradual rise in global commodity prices,” it said.

In 2017, the PPI for local production rose 6.7% compared with that in 2016, according to the DoS.

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