KUALA LUMPUR (Aug 29): MIDF Research expects food inflation pressure in Malaysia to remain elevated in the second half of calendar year 2023 (2HCY2023) as the country, being a net food importer, will be affected negatively amid climate change impacts and external developments on food export policies.

In a note on Tuesday, the research house said Malaysia’s producer price index (PPI) declined 2.3% in July 2023 (June: -4.8%), citing the Department of Statistics Malaysia.

MIDF said Malaysia's producer prices deflated for the sixth consecutive month in July 2023, declining by 2.3% year-on-year (y-o-y).

It said the contraction continued as manufacturing input prices deflated by 2.1% y-o-y, the steepest in three months.

The research house said goods-producing prices for the manufacture of food and the manufacture of coke and refined petroleum were among the key downward factors.

Meanwhile, it said the production cost for agriculture, forestry and fishing ended one year of contractionary sequence, expanded by 3.6% y-o-y (June 2023: -20.4% y-o-y).

It said the electricity and gas prices rose at the softest pace in three months at 0.1% y-o-y while inflation for water supply eased to 3.1% y-o-y (June 2023: +3.2% y-o-y).

By the processing stage, prices for crude materials dropped by 6.3% y-o-y (June 2023: -18.7% y-o-y), attributable to the decline in prices of non-food materials, said MIDF.

“Given the high base effect of commodity prices, the producer's output deflation was within expectations.

“The contractionary trend of the PPI indicated further moderation in overall inflationary pressure.

“However, it is worth to monitor the persistent increase in food price pressure,” it said.