Supply pressures continue to underpin rise in selling prices: MIDF Research

KUALA LUMPUR – MIDF Research believes that the rise in selling prices will continue to be underpinned by pressures from the supply side apart from the growing demand.

It said businesses may pass on more cost increases to their consumers with the producer price index (PPI) inflation remaining above consumer price index (CPI) inflation.

Malaysia’s PPI for local production, which measures the costs of goods at the factory gate, remained high in May with a growth of 11.2% year-on-year (y-o-y) compared with 11% y-o-y in April 2022.

Meanwhile, the CPI increased 2.8% y-o-y to 126.6 in May 2022 from 123.1 in May 2021.

The research house said although the rate of PPI inflation for agriculture, forestry and fishing industry slowed to +16.7% y-o-y, the double-digit increase highlights the ongoing upward pressures especially for food prices.

“Factors such as rising import costs, shortages of labour, and high commodity prices add to the inflationary pressures experienced by local producers, on top of other supply constraints and disruption in the global supply chain,” it said in a note today.

Meanwhile, on the United States consumer confidence index, MIDF Research expects that near-term sentiment and spending activities will continue to be influenced by the high inflation and rising borrowing cost, with the US Federal Reserve to continue tightening its monetary policy.

The US consumer confidence index declined for the second month to 98.7 in June 2022 from 103.2 in May 2022, the lowest level in 16 months.

“As a forward-looking indicator, the weaker consumer confidence points towards weaker momentum in the latter part of the year as Americans are more worried about inflation, particularly due to higher fuel and food prices,” it explained.

Nevertheless, MIDF Research added that the perception on the present economic situation was relatively unchanged from the previous month, despite a less favourable assessment on current business conditions and mixed views on the labour market. – Bernama, June 29, 2022