Food Inflation continues to contribute in the rise of Malaysia's inflation, June 2022

Malaysia's inflation increased 3.4 per cent to 127.4 in June 2022 as against 123.2 in the same month of the preceding year. The Food index increased 6.1 per cent and remained as the main contributor to the rise in the inflation during the month of June 2022. Meanwhile, other groups except Communications also recorded increases and led headline inflation to 3.4 per cent. Transport increased 5.4 per cent followed by Restaurants & Hotels (5.0%); Furnishings, Household Equipment & Routine Household Maintenance (3.4%); Miscellaneous Goods & Services (Links to an external site.) (2.2%) and Recreation Services (Links to an external site.) & Culture (2.2%).

The inflation for the second quarter of 2022 inclined 2.8 per cent to 126.6 as compared to 123.1 in the same quarter of the preceding year. On a quarterly basis, the inflation inclined 1.1 per cent as compared to the first quarter of 2022 (0.9%). Meanwhile, the inflation for the period of January to June 2022 increased 2.5 per cent as compared to the same period of the previous year. On a monthly basis, the inflation increased 0.6 per cent as compared to May 2022

Core Inflation

Core inflation measures changes in the prices of all goods and services (Links to an external site.), excluding volatile items of fresh food as well as administered prices of goods (Links to an external site.) by the government. Core inflation registered an increase of 3.0 per cent in June 2022 as compared to the same month of the previous year. The highest increase was recorded by Food & Non-Alcoholic Beverages group with 5.6 per cent.

In addition, the Transport group also recorded an increase of 5.2 per cent, followed by Restaurants & Hotels (5.0%); Furnishings, Household Equipment & Routine Household Maintenance (3.4%); Miscellaneous Goods & Services (Links to an external site.) (2.2%) and Recreation, Services (Links to an external site.) & Culture (2.2%).

Inflation by State

In June 2022, all states registered increases in inflation while two states showed increases above the national inflation level of 3.4 per cent. The highest increase was recorded by Wilayah Persekutuan Putrajaya (8.1%). Meanwhile, Wilayah Persekutuan Labuan and Melaka were the two states with the lowest increase by 2.5 per cent respectively.

All states registered an increase in the inflation of Food & Non-Alcoholic Beverages. The highest increase was recorded by Wilayah Persekutuan Putrajaya (8.2%) followed by Selangor (7.5%), Johor (7.3%), Pulau Pinang (6.8%) and Perlis (6.1%). The increase was mainly due to higher prices of meat and vegetables in June 2022 as compared to the same month last year. Meanwhile, other states showed an increase below the national inflation of Food & Non-Alcoholic Beverages rate of 6.1 per cent in June 2022.

Question 1

Discuss the disadvantages of inflation in an economy(10 marks)