WHEN paying their bills, just about everyone leaving a supermarket or a restaurant nowadays, is reminded of the inflationary pressures that have seeped into our lives.
Malaysia’s October headline inflation rate rose to 2.9% year-on-year compared to 2.2% in September.
This is the fastest pace since June – bringing the average inflation for the first 10 months to 2.3%.
AmResearch points out that persistent supply chain issues, coupled with labour shortages, have increased the cost of business. This in turn has pushed up the prices of consumer goods and services.
And it’s a global phenomenon.
Fitch Rating points out that the scale and longevity of the global inflation shock has taken most forecasters and central banks by surprise.
Fitch Rating points out that the scale and longevity of the global inflation shock has taken most forecasters and central banks by surprise.
Its chief economist Brian Coulton, in a recent report, notes that there are signs that price level shocks related to the Covid-19 pandemic shortages could be starting to morph into ongoing inflation. With monetary policy still super loose, this is worrying central bankers.
Fitch notes that the average headline consumer price index (CPI) inflation across the Fitch 20 countries (unweighted) increased to 5.1% in October, up from 1.9% at end-2020, and is at the highest rate since October 2008.
Meanwhile, core inflation, which excludes energy and food, has also increased sharply across the Fitch 20 countries.
The rating agency notes that the strong recovery in global aggregate demand in nominal terms over the past year has not been matched by an equal recovery in output.
Supply bottlenecks have resulted in real gross domestic product (GDP) expanding by less than expected in the third quarter of 2021, with inflation being stronger than expected.
Other than Malaysia, South Korea, Thailand, Indonesia, Singapore and China also reported faster CPI inflation in October among East Asian economies, analysts note.
The weakening of the ringgit has also made imports and raw materials more costly.
With inflation, consumers’ purchasing power is reduced and this is especially worrying for those in the lower-income level.
Research firms such as AmResearch expect the upward trajectory in price changes to remain as can be seen in other countries.
Global supply chain network disruptions, higher commodity prices and labour shortages continue to affect price movements in the economy, the research firm says in a recent note.
OCBC Bank in its global outlook for the first half of 2022 notes that a combination of both improving demand and continued global supply chain bottlenecks are posing a near-perfect inflation storm.
“Once elevated inflation persists into the first half of next year, it is no longer a matter of low base effects from 2020.
“In fact, the continued tightening of Covid-19 restriction measures and border controls due to first Delta and now Omicron, suggests that there will be no immediate panacea to inflation, short of another global recession,” it says.
Some good news for Malaysians comes from the decision by the Prime Minister Datuk Seri Ismail Sabri Yaakob’s RM262mil allocation as an early response to assist farmers being hit by a hike in fertiliser and pesticide prices.
In a move to arrest the spiralling cost of daily essentials, the Domestic Trade and Consumer Affairs Ministry will implement the Keluarga Malaysia Maximum Price Control Scheme between Dec 7 till 31.
The scheme is part of the governments’ effort to stabilise the price of essential goods while ensuring the availability of supply in the market. It will see price control being imposed on 12 daily essentials such as chickens, eggs and vegetables.
The government’s decision to put the lid on the fuel price with RON95 at RM2.05 per litre and diesel at RM2.15 per litre should also help cool down the increasing pace in overall inflation. However, there also needs to be a check on profiteering by unscrupulous sellers of consumer goods and services.