Malaysia’s PPI reverses decline, rises 0.2% in September after 7-month slump

KUALA LUMPUR: Malaysia’s Producer Price Index (PPI) rose 0.2% in September compared to the negative 2.2% in August, the Statistics Department (DOSM) reported today.

This is the first increase after seven consecutive months of decline since February 2023, due to the base effect and higher prices of primary commodities

Chief Statistician Datuk Seri Dr. Mohd Uzir Mahidin said the marginal increase was contributed by all sectors except the manufacturing sector.

“The agriculture, forestry & fishing sector increased by 3.2% due to the increase in animal production (5.7%) and growing of perennial crops (3.3%)

“At the same time, the mining sector increased by 6.9% after recording a -3.8% in the previous month supported by extraction of crude petroleum (8.1%) and extraction of natural gas (2.7%),” he said in a statement.

The electricity & gas supply sector increased 0.5% and the water supply increased by 0.9%.

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Meanwhile, the manufacturing sector remained negative for five consecutive months recording a -0.8% (August 2023: -2.3%), affected by the manufacture of coke & refined petroleum products (-7.1%) and the manufacture of food products (-5.3%).

On a monthly basis, PPI local production rose 0.9% in September 2023 after no changes recorded in August 2023.

For PPI local production by stage of processing, Mohd Uzir said the index of crude materials for further processing index continued to decrease by 5.4% in September (August 2023: -4%) with non-food materials and foodstuffs & feedstuffs indices posting an increase of 5.9% and 3.0% respectively.

The finished goods index remained positive to post 3.1%, due to the increase in capital equipment (4.4%) and finished consumer goods (1.2%).

On the other hand, the Intermediate materials, supplies & components index dropped by negative 2.7% (August 2023: -3.7%) due to processed fuel & lubricants (-8.2%) and materials & components for manufacturing (-4.3%) indices.

On a monthly basis, crude materials for further processing, Intermediate materials, supplies & components and finished goods indices increased by 3.9%, 0.2% and 0.1%, respectively in September 2023.

Mohd Uzir also explained that the PPI local production continued to

decline by negative 1.4% in the third quarter of 2023 (Q2 2023: -4.1%) due to the mining (-2.8%) and manufacturing (-1.7%) sectors.

On the contrary, the agriculture, forestry and fishing increased by 2.0%, and both water supply and electricity & gas supply sectors recorded increases of 2.3% and 0.2%, respectively.

However, a quarter-on-quarter comparison showed that PPI local production marginally inclined by 0.2% (Q2 2023: -0.1%)

Overall, Malaysia’s PPI decreased by 2.1% in the first nine months of 2023 as compared to last year due to the volatility of Malaysia’s main commodities, particularly palm oil products and crude oil.

Oil prices averaged US$94 per barrel in September 2023, an increase from US$75 in June 2023, and is expected to increase further in Q4 2023 based on Trading Economics.

Looking ahead 12 months, oil prices are projected to average US$98 per barrel after the OPEC countries extended their voluntary supply cut of crude oil.

Meanwhile, according to the Commodity Research Bureau Index (CRB) Index, overall commodity prices increased from around 290 in June to 320 index in September 2023, mainly driven by the increase in the price of crude oil.

Other factors, such as the shortage of agricultural supplies due to the Russia-Ukraine war and adverse weather patterns, are expected to keep price of commodities unstable in 2023.