PETALING JAYA: As Malaysia recovers from Covid-19 and removes curbs on tourism and social activities, consumer demand has surged and supply chains are now having trouble coping, leading to higher prices for items such as food and beverage.

       Socio-Economic Research Centre executive director Lee Heng Guie said as the domestic economy reopens and private consumption picks up, these accumulating business costs will be passed on to consumers if businesses and manufacturers are unable to absorb them.

       “It is observed that the food and beverage sector is raising menu prices, hawkers have raised prices, the price of furniture and clothing has increased, while semiconductor chip shortages have led to a sustained firming of consumer electronics prices,” he said.

       Lee pointed out that even a local chain store famous for selling items for about RM2 had announced a 10-sen increase in prices to RM2.20 from RM2.10 in the peninsula, and to RM2.40 in Sabah and Sarawak starting Dec 1.

       Headline inflation edged higher to 2.2% in September and will likely average higher at 2.8% in the fourth quarter of 2021, he said, adding that energy inflation was a notable contributor to the overall higher inflation, due in part to the substantial base effect.

       “Besides rising energy and food prices, inflated shipping, logistics and delivery costs, raw material costs, as well as the weak ringgit that have weighed on business costs and margins, could also be passed onto consumers via higher prices, especially if demand persists.

       “On the external front, disruptions to global food production and consumer goods supply chains will likely take time to ease,” he said.

       The government could consider implementing several short- and medium-term measures to help mitigate the cost pressures and inflation induced by supply constraints, and the increases in the price of goods and services.

       This includes lowering tariffs and import duties on consumable items, including intermediate inputs used in the production of final goods, and putting price controls as a stopgap measure to stabilise the price of essentials.

       Sunway University economics professor Dr Yeah Kim Leng said a combination of supply chain disruptions, low stock levels and stronger-than-expected post-pandemic demand has caused headline inflation to surge in many countries, especially the advanced economies.

       For example, he said consumer inflation in the US has surged above 5% from a year ago, triggering expectations that the US Federal Reserve may need to start raising the interest rate soon.

       In the case of Malaysia, Prof Yeah said the latest Consumer Price Index (CPI) has indicated the increase in the overall price levels remained low and within the desirable 2% to 3% range.

       “The comfortable overall price increase however masks the large increases in the prices of a range of household goods and services, particularly food and household items that experienced production shortfalls or higher input costs arising from global commodity price increases,” he said.

       Prof Yeah added that administrative price controls, and fuel and other subsidies provided by the government have helped to temper price pressures as well as inflation expectations.

       However, it is noted that inflation pressures are expected to rise in tandem with strengthening demand as consumer spending begins to normalise in the coming months as the pandemic subsides, he said.

       “Importantly, to keep a lid on price pressures from materialising into rising inflation, the government needs to work hand in hand with producers and industry players to increase supply in tandem with demand.“Both parties also need to find ways to raise productivity and ensure healthy competition so that the efficiency gains and cost savings can be passed to consumers,” Prof Yeah added.

       According to the Statistics Department, prices in the transport group climbed 11%, while food and non-alcoholic beverages increased 1.9%, with the highest increase recorded for meat (5.8%) mainly due to the increase in the average price of chicken in September 2021 to RM9.35 per kg compared to RM8.50 a year ago.