KUALA LUMPUR (June 29): A surge in inflation for businesses risks hitting consumers too, economists warned, as factory-gate prices increased at their fastest pace in four years.
The producer price index, which tracks costs for business and industries to manufacture consumer goods, is likely to remain on an uptrend beyond the current spike, Nanthakumar Loganathan, who teaches economics at Universiti Teknologi Malaysia, told The Edge.
That could prompt higher selling prices for the average consumers at the end of the value chain if margins shrank too much, he said.
The index climbed 7.8% in May when compared to the same month in 2025, data out on Monday showed. The reading was the highest since June 2022 and was also sharply higher than April’s 5.4% year-on-year increase.
The rate, however, was lower than that of consumer prices — the preferred gauge of inflation for the government and the country’s central bank — thanks to a system of subsidies and price control on essential goods and services.
However, household spending on food could rise in the near term as businesses would not be able to absorb the price increase indefinitely, flagged Putra Business School associate professor Ida Yasin.
“Not everything can be absorbed by producers, so it will be passed on to consumers,” she said, noting that rising prices for agricultural and fishery products that are consumed daily. Year-on-year, a sub-index covering agriculture, forestry and fishing was up 8.9% in May compared to 2.7% in April.
Ida, who teaches post-graduate business economics and international business, said subsidies and price controls have so far prevented the full impact on consumers but there is a limit to how long the government could sustain such support.
“The question is how much the government can continue paying for all the subsidies,” she added.