Sunday 15 Dec 2024
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KUALA LUMPUR (Jan 29): Malaysia’s producer price index (PPI) local production, which measures the prices of goods at the factory gate, reported a decline of 1.3% in December 2023 compared to a decrease of 1.5% the month prior, according to the Department of Statistics Malaysia (DOSM).

The decline was attributed to the mining (-3.4%),  manufacturing (-1.5%) and electricity and gas supply (-0.6%) sectors. On the other hand, the agriculture, forestry and fishing sector increased by 1.3% against a decrease of 0.4% in November, while the water supply index also went up 0.4% in December.

“On a monthly basis, the PPI local production further decreased by 0.2% in December 2023 compared with a decline of 0.7% in November 2023.

"All other sectors recorded a decline this month, with the exception of the agriculture, forestry and fishing sector which remained unchanged,” said chief statistician Dato’ Sri Dr Mohd Uzir Mahidin in a statement on Monday.

First annual decrease in three years

For the whole year, the index went down by 1.9% in 2023, after an increase of 7.8% in 2022.

“This was the first decrease since 2020 due to the lower prices of Malaysia’s main commodities. Commodity prices in 2023 are perceived as highly uncertain due to price volatility, especially in energy markets,” said Uzir.

“Crude oil prices have also experienced volatility due to a series of oil output cuts by the Opec+ and supply concerns related to the Israel-Hamas war. The intensifying geopolitical risks, including the potential for the war to escalate, could increase volatility in global energy supplies and prices,” he added.

Meanwhile, PPI local production recorded a decrease of 1% in the fourth quarter of 2023 compared with a decline of 1.4% in the third quarter.

“Malaysia’s CPO (crude palm oil) output appears to be recovering with production in this quarter higher compared with the same period in 2022, which leads to a moderate price of CPO,” said the DOSM.

Moving forward, the DOSM said commodity prices, as measured by the World Bank’s commodity price index, are projected to decline by 4% in 2024 after falling by nearly 24% in 2023, the steepest decline since the Covid-19 pandemic.

“Energy prices are projected to fall in 2024 and remain relatively flat in 2025. Agricultural prices are projected to decline throughout 2024 and 2025,” it added.

Touching on the downside risks, the department expected geopolitical risks to have a limited effect on commodity prices in 2024, though the risks remain elevated.

“Unsatisfactory global growth is a major downside risk, particularly for industrial commodities, while additional trade restrictions and an intensifying El Nino could drive up food prices.

“Moreover, the recent newsflash that a lengthy disruption of shipping via the Suez Canal could push up prices and weigh on economic growth, which is already struggling with the perilous combination of high inflation and economic contraction,” it said.

Elsewhere

In comparison with other major countries, the PPI in the US increased by 1% in December 2023 against 0.8% in the month prior, while Japan showed no growth in its PPI after an increase of 0.3% in the previous month.

Meanwhile, China’s producer price shrank by 2.7% compared with a 3% drop in the previous month due to softer decreases in mining & quarrying, raw materials and processing prices.

It was the 15th consecutive month of producer deflation, which highlighted the persistence of deflationary forces in China’s economy. Taiwan’s PPI also declined further by 0.4% mainly due to gas supply, petroleum and fabricated metal products.

Edited ByIsabelle Francis
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