Malaysia Dec Inflation Falls More Than Expected.

INFLATION fell by more than expected to a seven-month low in December, driven by lower fuel prices, and economists expect it to drop further. "Inflation is expected to continue heading south as the boost from food and other commodity prices drops out of the annual comparison, with it easily dipping below one per cent by the third quarter of the year," said Prakriti Sofat, an economist from HSBC Bank.

The consumer price index (CPI), which measures inflation, rose 4.4 per cent year-on-year. The government had cut the price of petrol by 10 sen to RM1.80 per litre while prices for RON92 petrol and diesel were lowered to RM1.70 from RM1.90 in December.

A poll done by Business Times had expected the CPI to register 4.76 per cent for December. "Food prices softened for the third consecutive month to 10.4 per cent year-on-year and more is expected to come through in the period ahead," Sofat said. Transportation costs also declined by 0.3 per cent year-on-year in December from 6.1 per cent previously and a peak of nearly 22 per cent in July last year.

She thinks that there is room to cut petrol prices further should oil prices continue to be weak. Yesterday, the price of US light crude was around US$41 (RM148) a barrel. According to the Statistics Department, the CPI grew by 5.4 per cent to 111.4 in 2008. The Business Times poll had expected the index to grow by 5.52 per cent. The increase was led by increases in food and non-alcoholic beverages and transport (8.8 per cent), alcoholic beverages and tobacco (7.3 per cent), restaurants and hotels (6.6 per cent).

Article from Business Times.com