KUALA LUMPUR (March 28): MIDF Amanah Investment Bank Bhd (MIDF) believes businesses are unlikely to pass on price pressures to consumers, as producer price Index (PPI) inflation remains below consumer price index (CPI) inflation.  

CPI inflation remained modest at +1.5% year-on-year (yoy) in February 2025, suggesting that higher production costs have yet to significantly impact consumer prices.

However, MIDF noted that government measures such as subsidy cuts, a higher minimum wage, and rising utility costs could add to inflationary pressures in Malaysia.

“Potential policy delays, particularly in subsidy rationalisation, could help keep inflation low and stable,” it said in its Economic Brief note on Friday.

Malaysia’s producer prices rose for the third consecutive month but at a slower pace, with PPI inflation easing to +0.3% y-o-y in February 2025 from +0.8% y-o-y in January 2025. This marked the slowest increase in the current uptrend.  

Upward price pressures were partly driven by sustained double-digit growth in the agriculture, forestry, and fishing sector, which moderated to +15.2% y-o-y in February 2025 from +16.5% y-o-y in January 2025. This was largely supported by a +26.1% y-o-y increase in the perennial crops sub-index, reflecting higher prices for key agricultural commodities.  

Meanwhile, water supply prices maintained an upward trend but slowed to +2.9% y-o-y (January 2025: +7.6% y-o-y). The electricity and gas supply sector and the mining sector saw declines of -0.2% y-o-y and -9.7% y-o-y, respectively.  

The manufacturing sector remained in deflation for the sixth straight month, though at a softer pace, with prices falling -0.3% y-o-y in February 2025.  

On a monthly basis, PPI inflation rose by +0.1% month-on-month (m-o-m) in February 2025, slowing from +0.3% m-o-m in December 2024.  

Key contributors to monthly price increases included a rebound in the agriculture, forestry, and fishing sector (+1.4% m-o-m; January 2025: -3.9% (m-o-m), a recovery in electricity and gas supply prices (+0.2% m-o-m; January 2025: -0.4% (m-o-m), and continued price gains in the manufacturing sector (+0.3% m-o-m), which held steady from the previous month.  

By stage of processing, PPI inflation for crude materials for further processing and intermediate materials, supplies, and components was flat on an annual basis. Meanwhile, the finished goods index edged up +0.7% y-o-y, driven by a +1.7% y-o-y increase in the capital equipment index.

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