Malaysia’s PPI surged 13.2% to record high in October 2021

Malaysia’s PPI surged 13.2% to record high in October 2021
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KUALA LUMPUR (Dec 1): Malaysia’s producer price index (PPI) for local production continued to record a double-digit increase for the seventh consecutive month in October this year attributed to higher commodity prices. 

The PPI local production, which measures the costs of goods at ex-factory prices in the local economy and indicates the inflation from the producers’ perspective, registered a 13.2% increase in October to 114.7. 

This is compared to a 3.6% drop recorded in the same month of the preceding year, the Department of Statistics Malaysia reported in its latest published monthly report “The Producer Price Index (PPI) Local Production, October 2021”. 

In a statement, Malaysia chief statistician Datuk Seri Dr Mohd Uzir Mahidin said the increase in PPI local production in October was attributed mainly to the mining index that surged 82.9% as opposed to the 43.5% decline in October last year, driven by higher prices for petroleum and natural gas commodities. 

“Moreover, the increase in PPI local production was also supported by the agriculture, forestry and fishing index that moved up 24.8%, followed by the manufacturing index (7.9%). 

“The utility index registered an increase of 0.7% for the electricity and gas supply index, while water supply index recorded a marginal drop of 0.7%,” he said. 

In terms of a month-on-month (m-o-m) comparison, Mohd Uzir noted the PPI local production rose 1% in October, with the increase contributed by a 5.5% rise in the mining index.

This, he said, is foreseen to remain in an upward trend until the end of this year due to positive global economic recovery as demand is bouncing back despite tightened supply, especially during winter. 

In addition, Mohd Uzir said the agriculture, forestry and fishing index increased 1.2% contributed by higher price for oil palm fresh fruit bunches commodity, whereby the price for this commodity has been increasing for the fourth consecutive month in October, largely underpinned by subdued production due to ongoing migrant labour shortage.

“Manufacturing index registered an increase of 0.4% supported by indices for manufacture of vegetable and animal oils and fats (1.5%), manufacture of refined petroleum products (0.6%), and manufacture of electronic components and boards (0.1%) subsectors. 

“In addition, electricity and gas supply and water supply indices recorded an increase of 0.4% and 0.1% respectively,” he said.

Mohd Uzir further explained that the surge in prices of commodities in October has contributed to the spike in the index of crude materials for further processing that recorded a new high, with a 40.4% increase in October 2021 as compared to -13.2% in October last year. 

The increase was attributed to indices of non-food materials (49%) and foodstuffs and feedstuffs (5.9%), Mohd Uzir said.

“The intermediate materials, supplies and components also climbed 11.7% (October 2020: -1.6%), due to an increase in processed fuel and lubricants (21.9%), and materials and components for manufacturing (12%) indices. 

“However, the index of finished goods registered a decrease of 0.5% due to a drop in capital equipment index (-2.9%),” he said.

On a monthly basis, Mohd Uzir said the index of crude materials for further processing edged up 2.7%, followed by the index of intermediate materials, supplies and components (0.9%), whereas the finished goods index remained unchanged as in the previous month.

Commenting on the expectation in the PPI nearing the year end, Mohd Uzir said the PPI is expected to remain high throughout this year due to the continued increase in input costs mainly in the prices of crude oil and natural gas.

"Higher commodities prices may benefit Malaysia's economy and households, especially those involved in the primary sector. However, the prolonged increases may cause inflation and the cost of living with the households feeling the pinch,” he added.

Joyce Goh