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  • Vietnam’s latest fuel price hike spikes inflation concerns

    Vietnam’s latest fuel price hike spikes inflation concerns

    Last weekend’s increase in fuel prices has stoked fears that Vietnam might not meet its 2018 inflation target.

    The ministries of Industry and Trade and Finance upped fuel price last Friday, and prices of biofuel E5 RON 92 went by VND675 per liter to VND20,906 (90 cents) and that of RON 95 by VND577 to VND22,347 (96 cents).

    Kerosene prices went up by VND485 to VND17,086 (73 cents) per liter and that of mazut oil by VND752 to VND15,694 (67 cents) per kilogram.

    The ministries said that the increase in domestic prices followed a rise in world fuel prices of 3-5 percent over the last 15 days.

    They said that a RON 92 barrel costs $90.36, RON 95, $92.40 and diesel, $96.89.

    This was the third fuel price hike since early September. In this period, the per liter price of E5 RON 92 went up by VND1,296 (5.6 cents) in total, while that of RON 95 rose by VND1,170 (5 cents).

    While the latest increase has raised concerns among economists that Vietnam will not be able to meet its inflation target for the year, transportation businesses are worried about immediate impacts.

    Lam Dai Vinh, director of a cargo business said that he had to raise his service prices as fuel price accounts for 40 percent of his costs.

    Although his customers were not happy, Vinh said that he had no other choice.

    Economist Nguyen Tri Hieu said that the fuel price hike is one of the contributing factors to higher consumer price index (CPI).

    Costs will increase for businesses, which in turn, will lead to higher goods prices and therefore affect inflation, he said.

    “It is unlikely that Vietnam will be able to keep inflation below its target of 4 percent this year,” Hieu added.

    Echoing Hieu, Ngo Tri Long, former director of the Market Research Institute under the Ministry of Finance, said that there are “variables” in the market that could negatively affect inflation this year.

    Inflation was at 3.57 percent from January to September this year, according to the General Statistic Office.

    Experts are concerned about other factors that could lead to higher inflation, including the Vietnamese currency, dong, falling against the US dollar as a result of the U.S.-China trade war and natural disasters that often occur in the second half of the year, making business target more difficult to meet.

    Oil firms grow

    However, local oil firms are seeing robust growth because of higher oil and petrol prices.

    PetroVietnam Drilling (PVD) saw the price of its stock on the HCMC Stock Exchange (HOSE) increase by 65 percent in the last 30 days because of increasing world prices.

    From September 21 to October 6, crude oil prices went up from $78.9 to $88.81 per barrel, while that of RON 95 rose from $84.16 to $92.4 per barrel.

    PVD board chair Do Van Khanh said that when crude oil prices go above $60 per barrel, the company’s oil rigs will not have to be put on hold, and when it reaches over $70, business will become stable.

    PetroVietnam Gas also saw revenues up by 41.5 percent in the first half of this year, because oil prices rose 36 percent year-on-year in the same period.

    The price of its stock on HOSE has gone up by over 40 percent to VND120,000 ($5.15) since early July.

    Vietnam’s fuel price is set to increase even more next year when the new environmental tax approved by the National Assembly’s Standing Committee takes effect.

    Starting January 1 the tax on petrol will increase from VND3,000 (13 cents) per liter to VND4,000 (17 cents), and on diesel from VND1,500 to VND2,000.

    The hike was scheduled for next year so that the government could keep inflation under 4 percent this year.

    Although the plan met strong public opposition during its draft phase, authorities defended it, saying it would bring VND15.7 trillion ($676.8 million) each year to the government’s coffers, and help to deal with environmental issues.

    In the first half of this year, Vietnam imported 7.07 million tonnes of fuel worth $4.66 billion, up 40.4 percent in value from the same time last year, according to Vietnam Customs.

    The country exported 1.6 million tonnes of fuel, worth over $1 billion, up 41.7 percent in value.

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  • New US interest rate to exert pressure on Vietnam’s inflation goal

    New US interest rate to exert pressure on Vietnam’s inflation goal

    The recent increase in U.S. interest rate will generate pressure on the Vietnamese dong and make inflation target hard to meet, experts warn.

    The U.S. Federal Reserve lifted interest rates for the third time this year by a quarter of a percentage point to a range of 2.00 percent to 2.25 percent on Wednesday, foreseeing another rate hike in December.

    Economist Nguyen Tri Hieu said this increase will pressure the USD-VND exchange rate, as the dollar strengthens further over the dong.

    Local banks will push their interest rates up to prevent their customers from exchanging local currency to the U.S. dollar, he said.

    Imports will be priced higher in VND, pushing the consumer price index (CPI) higher, Hieu said.

    “It is very likely that CPI will surpass the country’s goal of 4 percent for the year,” he added.

    Echoing Hieu, HSBC country head of global markets Ngo Dang Khoa said that the U.S. interest rate moves will create challenges for Vietnam’s economy as the inflation rate is closely approaching the government’s limit.

    The weakened VND can also lower capital flow from foreign investors as they might not be confident in making further investments, Khoa said.

    It can also slow down the equitization (privatization) of state-owned enterprises as changes in the dong’s value will affect the stock market, he noted.

    “For local businesses, higher interest rates will increase capital expenditures, which will have a direct impact on their profit.”

    But Khoa said he believes there are also opportunities for Vietnam to increase exports to the U.S. as spending and demand for investment in the U.S. will rise with the new interest rate.

    Between January and September this year, Vietnam’s GDP grew by 6.98, the highest nine-month growth rate in eight years. Inflation for this period was 3.57 percent, according to the General Statistics Office.

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  • Indonesia’s August Inflation Picks Up, but Stays Below Market Expectation

    Indonesia’s August Inflation Picks Up, but Stays Below Market Expectation

    Indonesia’s annual inflation rate picked up slightly in August but was below market expectation and remained within the central bank’s target range, statistics bureau data showed on Monday.

    Consumer prices rose 3.20 percent in August from a year earlier, compared with July’s annual inflation rate of 3.18 percent. Analysts surveyed by Reuters had expected a rate of 3.33 percent.

    Bank Indonesia targets inflation rate in the range of 2.5 percent to 4.5 percent this year.

    The consumer price index was down 0.05 percent on a monthly basis due to a drop in food prices, such as that of chicken and chilies, Central Statistics Agency (BPS) head Suhariyanto told a news briefing.

    The annual core inflation rate, which excludes prices of government-controlled goods and volatile food, also edged up to 2.90 percent in August, the second month of acceleration and higher than the poll’s estimate of 2.85 percent.

    Bank Indonesia Governor Perry Warjiyo has said the rupiah’s slump had not affected prices at least until July. The rupiah has lost nearly 8 percent of its value so far this year and on Monday it was trading at its weakest in 20 years.

  • July inflation expected to be cushioned by zero-rated GST

    July inflation expected to be cushioned by zero-rated GST

    RAM Ratings expects the zero-rated goods and services tax (GST) to act as a cushion limiting inflationary pressure on Malaysia’s July inflation rate, which is projected to increase to 1% from 0.8% in June.

    Meanwhile, full-year inflation is expected to stand at 1.3 %.

    Transport fuel is seen as a trigger to higher inflation given the 12.4% rise in the average price of RON95 petrol in July (June: 9.9%) amid low-base effects. Prices had averaged RM1.96/litre in July 2017 compared with RM2/litre in June 2017 against the current subsidised level of RM2.20/litre.

    Commenting on the sales and services tax, RAM head of research Kristina Fong said initial assessment on the new tax regime and its potential inflationary impact does not indicate any destabilisation of prices or consumption at this juncture due to the smaller share of products in the consumer price index basket and its nature as a single layer tax applying to manufacturers rather than end-consumers directly.

    This is supported further by the less restrictive administrative costs of implementation and proposed exemptions on raw materials, components, and packaging for registered manufacturers.

    “In view of the deflationary pressure from the change in the taxation system, coupled with lower fuel prices from the reinstatement of fuel subsidies and a persistently weak growth trajectory for food prices, overall inflation is envisaged to average 1.3% this year,” she said.

    Given the lower core inflation and moderating GDP growth (4.9%), RAM said it appears to be a downward bias for the overnight policy rate (OPR) this year.

    However, it expects the interest rate to remain unchanged at 3.25% through the rest of 2018 on the back of lingering policy uncertainties and some macro risks may still pose a risk to capital outflows.

    “That said, we believe that monetary policy will play a bigger role because fiscal consolidation is perceived as a key trend going forward; hence less scope for additional pump-priming.”

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  • Vietnam’s inflation target under pressure: experts

    Vietnam’s inflation target under pressure: experts

    Several economic factors including high commodity and fuel prices will make it difficult for Vietnam to keep its inflation within targeted limits this year, economists say.

    The country’s consumer price index (CPI) in June increased 0.61 percent from May, the highest such increase in the last seven years, according to the General Statistics Office (GSO).

    The CPI in June was 4.67 percent higher than the same month last year, and CPI in the first six months was 3.29 percent higher, the GSO said.

    The National Assembly, Vietnam’s parliament, has set a target of inflation not rising beyond 4 percent this year.

    Several economists believe that the target can be met but also express their concern over factors that can spoil set plans.

    The rise in world oil prices is one factor. Crude oil is now at $72.94 a barrel, higher than the estimate of $70 when the parliament set the target.

    Higher oil prices will see fuel prices rise, leading to a higher CPI, said economist Ngo Tri Long, former director of Research Institute of Market Price under the Ministry of Finance.

    Vietnamese fuel prices in the first six months went up year-on-year by 13.95 per cent, resulting in a 0.59-percent increase in CPI, according to the GSO.

    If global oil prices continue to climb, this year’s CPI increase will be higher than that of last year, Long said.

    Other experts are concerned about the new environmental tax on fuel that is set to be imposed this October. The tax will certainly impact the average CPI this year, increasing it by 0.11-0.15 percent, Deputy Minister of Finance Vu Thi Mai said in March.

    The tax will be discussed at a meeting of the Standing Committee of the National Assembly next week. Should it pass, it will affect the transportation and production costs of local goods, weakening their competitiveness, said Vu Vinh Phu, former chairman of the Hanoi Supermarket Association.

    Phu said he was also concerned about current commodity prices in the country. In local supermarkets, rice was being sold at VND16,000-18,000 ($0.70-0.78) per kilogram, 44 percent higher than their export price.

    Sugar is being sold at VND21,000-23,000 per kilogram, twice as much as export price, Phu said. “If the retail prices of essential commodities keep rising, CPI will definitely be impacted,” he added.

    Echoing Phu, economist Long said he believed that with pork prices being high in the first 6 months, they are likely to increase further in the second half of the year.

    As the country is often hit by storms in the second half of the year, prices will climb up, making CPI increases even higher, Long added.

    Within reach

    However, Long also saw potential for achieving the National Assembly’s inflation target.

    Thanks to new government policies starting this July, citizens will enjoy lower prices for certain health services, and the Prime Minister has ordered no increase in electricity prices for the rest of the year.

    These are positive factors for keeping inflation in check, he said.

    Vietnam’s control of inflation in the first half this year has been a notable positive achievement, said Dr. Vu Dinh Anh with the Economy and Finance Academy.

    Although fuel prices will be higher, with good policy and management, the target of keeping CPI increase under 4 percent will “not be impossible,” he said

    Vietnam’s GDP in the first half of 2018 increased 7.08 percent, the highest ever recorded in the same period since 2011. The Asian Development Bank estimates annual growth at 7.1 percent.

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  • Indonesia’s June Annual Inflation Rate Slows to 3.12%

    Indonesia’s June Annual Inflation Rate Slows to 3.12%

    Indonesia’s annual inflation rate slowed less than expected in June from a year ago and stayed within Bank Indonesia’s target range, the Central Statistics Agency said on Monday (02/07).

    June’s annual inflation rate came in at 3.12 percent, compared with May’s 3.23 percent. Analysts surveyed by Reuters had expected a rate of 2.88 percent.

    Suhariyanto, the head of the statistics bureau, said the consumer price index rose 0.59 percent on a monthly basis in June, due to rising demand during the Muslim fasting month.

    However, the annual rate fell because of the base effect of high prices during last year’s Ramadan, he said.

    The annual core inflation rate, which excludes government-controlled and volatile food, eased slightly to 2.72 percent in June, from 2.75 percent in May. Bank Indonesia targets inflation at 2.5-4.5 percent this year.

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  • Malaysia’s inflation rate in May rises at fastest pace in four months

    Malaysia’s inflation rate in May rises at fastest pace in four months

    Malaysia’s consumer price index (CPI) increased 1.8% in May 2018 – the fastest pace in four months – to 121.1 compared with 119.0 in the corresponding month of the preceding year due to a strong recovery in transport prices.

    According to the Department of Statistics, among the major groups which recorded increases were transport (+3.8%); food & non-alcoholic beverages (+2.2%); housing, water, electricity, gas & other fuels (+2.1%); restaurants and hotels (+2.1%); health (+1.9%); and furnishings, household equipment & routine household maintenance (+1.5%).

    MIDF Research expects inflation to moderate in the upcoming months amid zero-rated GST, tax holiday period until the implementation of the Sales and Services Tax in September and stable retail fuel prices, which will reduce business costs.

    “At this juncture, we expect 2018’s fuel-related inflation to moderate amid higher base effects, re-subsidisation of domestic fuel price and high likelihood of a downward adjustment of global commodity prices in 2H18 from the current temporary factors, which pushed the prices up,” said MIDF Research.

    It expects headline inflation to average at 2.6% this year compared with 3.8% in 2017 amid higher base effects, supported by inflation rate for 1Q18 which stood at 1.8% compared with 4.2% in the same period last year.

    “As inflationary pressure remains steady, we anticipate Bank Negara Malaysia to maintain its current monetary policy with no more hikes in the overnight policy rate for the rest of 2018 barring any pleasant upward surprises in domestic economic growth,” it said.

    The research firm said that food inflation in Malaysia continued to fall from 2.6% year on year (yoy) in April 2018 to 2.2% yoy last month. Prices for fresh food products such as meat and seafood continued expanding however at a moderate pace of 1.6% yoy and 5.9% yoy respectively.

    In contrast, fruits inflation increased to 1.5% yoy while vegetables decreased further by 3.7% yoy. There is a potential for food inflation to rise in June due to higher demand for Ramadan and Hari Raya.

    On a monthly basis, the May CPI was up 0.2% compared with April 2018.

    Core inflation meanwhile, rose 1.5% in May 2018 compared with the same month of the previous year. Core inflation excludes most volatile items of fresh food as well as administered prices of goods and services.

    For the first five months of the year, the CPI registered an increase of 1.7% against the same period last year.

    In the overall CPI for May, inflation in three regions surpassed the national rate of 1.8%, namely Kuala Lumpur (+2.2%), Selangor & Putrajaya (+2.1%) and Johor (+2%).
    According to MIDF Research, the inflation rate increased in May across all states except Penang.

  • Indonesia’s Annual Inflation Rate Slows in May

    Indonesia’s Annual Inflation Rate Slows in May

    Indonesia’s annual inflation rate slowed in May as the increase in food prices remained modest despite rising demand during the Muslim fasting month of Ramadan, data from the Central Statistics Agency showed on Monday (04/06).

    The headline consumer price index (CPI) in May rose 3.23 percent from a year ago, slightly below the median forecast in a Reuters poll, which had expected a rate of 3.28 percent. April’s annual rate was 3.41 percent.

    On a monthly basis, consumer price rose 0.21 percent.

    The annual and monthly rates were unusually low for inflation during Ramadan, which was a “delightful news” for authorities seeking to keep inflation under control, said Suhariyanto, the head of the statistics agency.

    However, the annual core inflation rate, which excludes government-controlled and volatile food prices and was more affected by the rupiah currency’s weakness, rose to 2.75 percent in May, from April’s 2.69 percent. The poll had expected a rate of 2.73 percent.

    Bank Indonesia targets inflation at 2.5-4.5 percent this year.

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  • Fuel price hike propels Vietnam’s May inflation to record high

    Fuel price hike propels Vietnam’s May inflation to record high

    Recent fuel price hikes have kicked up Vietnam’s Consumer Price Index (CPI) this month by 3.86 percent year on year, the General Statistics Office has reported.

    The hike was led by traffic and transportation services, which rose 1.72 percent over last month, followed by food and beverages by 0.88 percent and housing, construction and utilities by 0.34 percent.

    The increase in CPI this month is attributed to the fuel price hikes on May 8 and May 23, in which A95 and E5 fuel prices went up by VND1,010 per liter (4 cents), while diesel prices increased by VND960 per liter.

    The new gasoline prices have, in turn, pushed up the fares of transport services, said Huynh Quoc Thinh, CEO of the Phu My transport company. Fuel costs for containers and heavy trucks account for 40 percent of the total revenue. For other types of vehicles, the ratio is 30 percent.

    Higher transport tariffs could lead to higher general consumer prices, economists say.

    “Most of the products will have to suffer higher transportation costs, directly or indirectly, and therefore, the people will have to take the ‘full force’ of this increase,” economist Ngo Tri Long said.

    In addition to fuel price hikes, the plan to raise environment taxes on fuels starting in July could further increase inflation and hurt businesses in the country, the economists have warned.

    Under a Finance Ministry proposal being reviewed by the Standing Committee of the legislative National Assembly, the environment tax on gasoline will increase by 33 percent to VND4,000 per liter (17 cent).

    If approved, the tax increase would raise inflation by 0.11 to 0.15 percentage points in 2018. Vietnam has set an inflation target of 4 percent for this year.

    During a cabinet meeting last month, PM Nguyen Xuan Phuc warned that inflation could increase further as global prices of crude oil and basic commodities rose.

    “We cannot be careless when it comes to inflation,” he said.

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  • Malaysia’s April headline inflation up 1.4%

    Malaysia’s April headline inflation up 1.4%

    Headline inflation rate rose by 1.4% year-on-year (y-o-y) in April 2018, slightly higher than 1.3% year-on-year registered in the preceding month as transport inflation rebounded from a negative territory logged for two months to positive at 0.4% y-o-y, said MIDF Research.

    Amid unfavourable base effects, MIDF Research foresees headline inflation rate to average at 2.6% this year, supported by inflation rate for 1Q18 which registered at 1.8% compared to 4.2% in the same period last year.

    “We expect inflationary pressure mainly from fuel-related items to calm, consistent with gradual rise in global commodity prices on top of pass-through effect from a strengthening ringgit, re-subsidisation of domestic fuel price and withdrawal of GST.”

    As inflationary pressure remains steady, it anticipates Bank Negara Malaysia to maintain its current monetary policy with no more hikes in overnight policy rate for the rest of 2018 barring any pleasant upward surprises in domestic economic growth.

    It noted that food inflation continues to dip but moving forward, there is a potential for food inflation to rise in the upcoming months due to rising demand for Ramadan and Hari Raya celebrations.

    It expects 2018’s fuel-related inflation to moderate amid of unfavourable base effects, re-subsidisation of domestic fuel price and high likelihood of a downward adjustment of global commodity prices in 2H18 from the current temporary factors which pushed the prices up.

    MIDF also foresees inflation rate across all states will moderate below 3% in 2018 amid of unfavourable base effects and zero rated GST.

    “Looking forward, we foresee inflation level will gradually increase buoyed by moderating global growth, steady rise in commodities prices and tight labour market conditions.”

    The Consumer Price Index (CPI) increased 1.4% in April 2018 as compared to the same month last year, after indices for food & non-alcoholic beverages (+2.6%), restaurants and hotels (+2.2%), health (+2.1%), housing, water, electricity, gas & other fuels (+2.0%), furnishings, household equipment & routine household maintenance (+1.8%) and education (+1.1%), all recorded increases, according to the Department of Statistics.

    Chief Statistician Malaysia Datuk Seri Dr Mohd Uzir Mahidin said the overall index was also affected by the increase in the transport group by 0.4% in April 2018 as compared to the 1.5% decrease recorded in March 2018. Meanwhile, the CPI for the period January-April 2018 increased 1.7% as compared to the same month last year.

    The Statistics Department also reported that three states surpassed the national CPI rate of 1.4% recorded in April 2018 as compared to April 2017, which are Kuala Lumpur (+1.9%), Selangor & Putrajaya (+1.6%) and Penang (+1.5%).

    FXTM global head of currency strategy & market research Jameel Ahmad said while the inflation reading continues to suggest that the economy is encountering a period of lower inflation, it sees risks that this outlook could change over the coming months.

    “There has been a drastic change in investor appetite towards the US dollar, which has crumpled emerging market currencies across the globe. This has also impacted the ringgit, which currently appears to be at risk to falling back towards 4 against the dollar and is likely to do so, if traders continue to stock up on the US dollar.”

    As a result of the ringgit weakening, he said import price pressures are likely to increase over the next two to three months and this will consequently result in higher inflation potential.

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  • Asian currencies rise as dollar off despite higher U.S. inflation

    Asian currencies rise as dollar off despite higher U.S. inflation

    Asian currencies firmed on Thursday, boosted by heftier global risk appetites as the dollar slipped despite stronger-than-anticipated U.S. inflation and a rise in Treasury yields.

    Tracking a rally in Wall Street, Asian stocks brushed aside U.S. inflation data that showed that January core CPI posted the
    largest gain in a year, raising pressure on the Federal Reserve to be more aggressive in raising U.S. interest rates this year.

    The dollar index weakened to a near 2-week low, after the rebound in equities, evoking the idea that the greenback might be in a period of persistent weakness.

    “The dollar advanced against other currencies when US CPI inflation was released but pared the gains and weakened later as
    U.S. equities proved more resilient, with the VIX index pulling back further below 20,” said Qi Gao, FX strategist (EM Asia) at
    Scotiabank.

    “Continued risk appetite sent Asian currencies higher this morning, I think risk appetite will likely continue as synchronized global growth is expected to boost the EUR and JPY, while bolstering EM Asian currencies as long as risk appetite sustains.”

    The Malaysian ringgit led gains among regional currencies as it firmed 0.6%, while the Indian rupee strengthened 0.3%.

    The Philippine peso, the worst performing Asian currency in 2018, also rode on the positive sentiment to strengthen 0.3%, on track to end five-consecutive sessions of losses.

    The Singapore dollar firmed 0.1% after data showed that the city–state’s annual exports in January surged despite another decline in electronics shipments, helped by a jump in sales of petrochemical products.

    The Korean won, Chinese yuan and Taiwan dollar did not trade on Thursday, because of the Lunar New Year holiday.

    The rupiah strengthened 0.5%, even though Indonesia’s statistics bureau on Thursday said the country in January had a US$670 million trade deficit, while a Reuters poll had forecast a US$190 million surplus.

    The baht firmed 0.5% on Thursday.

    Thailand’s central bank left its benchmark interest rate unchanged on Wednesday, near record lows, saying it expects inflation to stay largely subdued even as Southeast Asia’s second-largest economy gains further momentum.

    The central bank said the economic outlook had improved on the back of strong global demand for its exports, but recovering
    domestic demand and inflation developments should be monitored.

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  • Bank of Indonesia Says Limited Room to Cut Interest Rates

    Bank of Indonesia Says Limited Room to Cut Interest Rates

    Bank Indonesia Governor Agus Martowardojo emphasized on Wednesday (24/01) that there is limited room for lowering interest rates due to the United States Federal Reserve’s plan to increase its benchmark rate, and the need to keep inflation in check.

    “[Room] to adjust the seven-day reverse repo rate is probably very narrow under the current conditions,” Agus told reporters. He added that the central bank will rely more on other monetary instruments to drive the economy.

    Agus said Bank Indonesia will relax reserve requirements by July. Lenders are currently required to keep a minimum reserve of 6.5 percent of their total rupiah deposits at the central bank at any time, comprising daily reserve of 5 percent and a two-week averaging reserve of 1.5 percent.

    Agus said Bank Indonesia will increase the averaging portion to 2 percent to allow lenders to be more flexible in managing their liquidity.

    It will also relax the averaging rules for foreign exchange deposits and sharia-compliant banks.

    The central bank will also allow larger bond purchases as a portion of banks’ loan to deposit ratios, and improve secondary reserve requirements for macroprudential liquidity buffers.

    Agus said the external risk stems especially from the Fed’s plan to increase its benchmark rate, while there are also fears that geopolitical conditions may increase pressure on financial market stability, including in Indonesia.

    Bank Indonesia will also pay more attention to inflationary pressures, especially on volatile goods. Prices of rice, chili peppers and other horticultural items are expected to greatly contribute to inflation this month, he said.

    “We welcome the government’s decision to import rice, and as rice harvest will also take place soon, the prices will be under control,” Agus said.

    Bank Indonesia has set an inflation target of between 2.5 percent and 4.5 percent this year.

    The central bank last cut its benchmark interest rate in October to 4.25 percent from 4.5 percent, as inflation continued to decline at the time. This also complemented the bank’s monetary easing, which saw it cut by 200 basis points from December 2015 until last year.

  • Malaysia Inflation rises 3.5% in Dec 2017, full year 3.7%

    Malaysia Inflation rises 3.5% in Dec 2017, full year 3.7%

    Malaysia’s consumer price index (CPI) expanded 3.5% to 120.9 in December 2017 from 116.8 in the corresponding month of 2016, mainly driven by the transport segment, which was up 11.5%.

    For the full year of 2017, CPI rose 3.7% compared with the same period in 2016.

    According to the Department of Statistics, other major groups which recorded increases in December 2017 were food & non-alcoholic beverages (+4.1%), restaurants and hotels (+2.6%), furnishings, household equipment & routine household maintenance (+2.4%), health (+2.3%) and housing, water, electricity, gas & other fuels (+2.2%).

    On a month-on-month basis, CPI increased 0.1% in December 2017. Core inflation, which excludes most volatile items of fresh food, as well as administered prices of goods and services, rose 2.2% in December 2017 compared with the same month of the previous year.

    MIDF Research expects the headline inflation rate to average at 2.6% in 2018 amid unfavourable base effects.

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  • Singapore inflation rises 0.6% in November

    Singapore inflation rises 0.6% in November

    Singapore’s headline consumer price index (CPI) rose a slightly-faster-than-expected 0.6 per cent in November from a year earlier, data showed on Tuesday (Dec 26), as private road transport costs edged higher.

    That is the fastest year-on-year increase since July, when headline CPI also rose 0.6 per cent from a year earlier.

    Core inflation, which excludes accommodation and private road transport costs, remained unchanged from the previous month at 1.5 per cent, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) said in a joint press release on Tuesday (Dec 26).

    Private road transport costs rose 4.1 per cent in November from a year earlier, data from the Singapore Department of Statistics showed.

    Accommodation costs fell by 3.9 per cent in November, moderating from the 4.2 per cent drop in the previous month. The smaller decline reflected the dissipation of the dampening effect of the disbursement of Service & Conservancy Charges (S&CC) rebates on the year-ago change in accommodation costs in October, the joint release said.

    Services inflation edged up to 1.6 per cent in November from 1.5 per cent in October. This was on account of a rise in airfares, which was a reversal from the decline registered in the previous month, as well as a larger increase in telecommunications services fees and holiday expenses which more than offset the smaller increase in recreational & cultural services fees.

    Food inflation was unchanged from the previous month at 1.5 per cent, as the pace of increase in prices for non-cooked food and food services was similar in both months.

    The overall cost of retail items registered a smaller 0.5 per cent increase in November compared to the 0.9 per cent increase in October. This largely reflected a fall in the prices of personal care products, as well as a smaller rise in the prices of personal effects, the joint release said.

    FUTURE OUTLOOK

    Looking ahead, the MAS expects core inflation to be around 1.5 per cent in 2017 and average between 1 and 2 per cent in 2018. MAS said in a media release that the CPI is projected to come in at around 0.5 per cent this year and stay in the range of between 0 and 1 per cent next year.

    However, Francis Tan, economist at UOB, said he does not expect major risks of a higher inflationary trend, but noted that all eyes could be on MAS’ next policy meeting in April.

    “The market expectation, and our expectation, is that the MAS, in their next policy meeting in April 2018, will start to normalise. I think that goes to show that among all the central banks in the world, they are more or less looking at or already started the monetary policy normalisation and the MAS is likely to continue to likewise,” said Mr Tan.

    “Of course we are not looking at a very steep increase in the S$NEER slope even at the start. We are only looking at a 0.5 per cent per annum at the start, but with more data coming in, the central bank will definitely tweak its policy appreciation stance.”

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  • Indonesia’s Inflation Eased in September to 3.72%, Weighed by Food Prices

    Indonesia’s Inflation Eased in September to 3.72%, Weighed by Food Prices

    Inflation in Indonesia continued to ease in September as some basic food commodity prices dropped, suggesting full-year inflation will be limited despite a pick up in the first few months of the year.

    September’s consumer price index, a gauge of inflation, rose 3.72% compared with the same period a year ago, slowing from August’s 3.82% rise, the official Statistics Agency said Monday. Compared the month before, prices rose 0.13%, after falling 0.07% in August.

    The median forecast from a survey of 10 economists by The Wall Street Journal was for 3.70% year-over-year inflation. The median prediction for on-month inflation from seven economists polled was 0.10%.

    Inflation was stoked by a 1.03% increase in education costs in September, compared with August. But a 0.53% fall in basic food prices mitigated the impact on headline inflation, the agency added.

    Core inflation, which excludes volatile food prices and those determined by the government, picked up to 3.00% compared with a year ago, August’s 2.98%, the first increase in many months, which may indicate an early recovery in consumers’ purchasing power.

    Although inflation is likely to continue retreating for the rest of the year, Bank Indonesia isn’t expected to cut interest rates again next month, after two consecutive 0.25-percentage-point cuts recently.

     

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