Why did Malaysia’s PPI fall to -2.3% in July 2023?

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Malaysia's Producer Price Index Declined by 2.3% in July 2023

Malaysia's producer price index (PPI) recorded a decline of 2.3 per cent in July 2023, a notable shift from the previous month's 4.8 per cent decrease. This overall contraction was primarily driven by significant downturns in the mining and manufacturing sectors, which offset increases observed in agriculture and utilities. The PPI, which tracks prices at the factory gate, reflects changes in the cost of production for goods within the country.
Mining Sector Contraction Impacted Overall PPI

The mining sector experienced a substantial decrease of 10.8 per cent in July 2023, a continuation of a downward trend from June's -16.6 per cent. A key factor contributing to this decline was the extraction of crude petroleum index, which fell by 14.8 per cent. This contraction in a significant commodity sector directly influenced the broader producer price trends for the month.
Manufacturing Sector Also Saw Declines

The manufacturing sector also contributed to the overall PPI decrease, declining by 2.1 per cent. This reduction was largely influenced by specific sub-sectors, notably the manufacture of coke and refined petroleum products, which saw an 11.7 per cent drop, and the manufacture of food products, which decreased by 8.9 per cent. These downturns within manufacturing highlight specific pressures affecting production costs or output prices in these industries.
Agriculture and Utilities Showed Growth

In contrast to the mining and manufacturing sectors, the agriculture, forestry, and fishing sector posted a positive growth of 3.6 per cent in July 2023. This marked the sector's first increase of the year, recovering from a significant double-digit decrease in June. Additionally, the utility sector experienced modest growth, with the water supply index rising by 3.1 per cent and the electricity and gas supply index increasing by 0.1 per cent.
Changes in Goods Processing Stages

Examining the PPI by stage of processing reveals further details about the price movements. The index for crude materials for further processing continued its decline, falling by 6.3 per cent in July. Intermediate materials, supplies, and components also saw a decrease, declining to -3.3 per cent. However, the index for finished goods showed an increase, edging up by 3.4 per cent, indicating a divergence in price trends between raw or intermediate inputs and final products.

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Why did Malaysia’s PPI fall to -2.3% in July 2023?

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