KUALA LUMPUR (Sept 30): MIDF Research expects Producer Price Index (PPI) inflation to remain high in the near term, underpinned by the supply chain disruptions, logistic delays, shortages of materials and rising input prices.

“Gauging the impact on the CPI (Consumer Price Index) inflation, the higher PPI inflation indicates that consumer prices may continue to rise driven
by cost-push inflation as producers may pass the additional cost onto end-consumers,” the research house said in a note on Thursday.

Earlier in the day, the Department of Statistics Malaysia (DOSM) reported that the PPI for local production rose 11.3% in August, compared to a 2.8% decline in the same month last year, marking the seventh straight month of an upward trend.

DOSM chief statistician Datuk Seri Dr Mohd Uzir Mahidin said the growth was underpinned by the mining index, which surged 51.8% versus a 33.7% drop in August 2020.

He added that the PPI for local production growth was additionally supported by the year-on-year growth of the agriculture, forestry and fishing (27.6%), and manufacturing (7.1%) indexes.

On a month-on-month basis, the PPI for local production grew 0.6% in August, after registering similar growth in July.

Meanwhile, MIDF Research has maintained its 2021 gross domestic product growth forecast at 4.6% as it foresees that the gradual relaxation of restrictions on the economy will result in improving economic activities in the latter part of the year and going into 2022.

“In addition, the growing external demand for semiconductor and electrical and electronics components amid the global shortages will continue to support Malaysia’s exports and trade-oriented industries.

“Moreover, the trade outlook will also be positive on the back of growing demand for commodities such as palm oil and liquefied natural gas,” the research house said.

“Downside risks to growth could come from the possible worsening of the Covid-19 situation locally and globally, challenges from ongoing supply constraints and potentially weaker external demand,” it said.

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