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Malaysia's wholesale and retail trade sector registered a 4.7% year-on-year (y-o-y) growth with total sales of RM149.2 billion in August 2024, said the Department of Statistics Malaysia (DOSM).

Chief statistician Datuk Seri Dr Mohd Uzir Mahidin said the growth was primarily driven by the retail trade sub-sector, which increased 5.9% to RM64.1 billion.

The motor vehicles sub-sector expanded by 4.1% to RM18.9 billion, while wholesale trade grew by 3.7% to RM66.2 billion.

"On a month-on-month (m-o-m) basis, this sector recorded a 0.1% increase, reflecting sustained consumer demand and stable market conditions," he said in a statement on Friday.

Mohd Uzir noted that the retail sales in non-specialised stores led the retail trade sub-sector by contributing RM24.8 billion, with a strong 7.8% y-o-y rise and a 1.4% m-o-m growth.

The retail sales of food, beverages, and tobacco also performed well, posting RM4.1 billion in sales, marking a 6.8% y-o-y and 1.3 m-o-m increase.

Meanwhile, retail sales of automotive fuel sales saw steady progress, growing 5.3% y-o-y and 0.6% m-o-m to reach RM6.0 billion, he added.

The chief statistician said the wholesale of agricultural raw materials and live animals contributed RM6.2 billion, with a strong y-o-y increase of 7.8% despite a small m-o-m dip of 0.3%.

According to Mohd Uzir, the index of retail sales over the internet grew 6.5% year-on-year in August 2024, as compared to 5.7% in July 2024.

For seasonally adjusted value, the index rose 4.7% as against the previous month, he said.

After netting out the effect of price changes, the volume index of wholesale and retail trade for August 2024 registered a y-o-y growth of 3.8%.

"The expansion was contributed by retail trade which stood at 4.0%. This was followed by wholesale trade (3.8%) and motor vehicles (2.8%).

“However, for the seasonally adjusted volume index, it went down 2.9% m-o-m," said Mohd Uzir.

Source: The edge markets

Inflation in Singapore has cooled but its central bank is poised to stick to its three-year-old policy stance that supports a stronger currency given rising risks of higher prices from the Middle East conflict and the US presidential election, economists told The Straits Times.

If its stands pat at its upcoming policy review on Oct 14, the Monetary Authority of Singapore (MAS) will be bucking the global easing trend seen in the first interest rate cuts in four years by the US Federal Reserve, European Central bank, Bank of England and the US Federal Reserve.

While a stronger Singapore dollar curbs import costs, it also makes exports more expensive to foreign buyers and may cut the number of tourist visiting Singapore due to more expensive hotel rooms and attractions. Such changes in demand will eventually cause local businesses to cut back on production, hiring, and investment. Hence, MAS over the longer term tries to maintain an appropriate exchange rate.

Unlike other central banks, MAS uses the trade-weighted value of the Singapore dollar to achieve price stability. It guides the local dollar against a basket of currencies of its major trading partners to crimp the cost of imports.

It has to balance this against the risk of a too-strong Singdollar that would make exports more expensive to overseas markets and deter tourists from visiting Singapore.

Like other central banks, MAS has succeeded in bringing down core inflation which hit 5.5 per cent at its peak in January 2023. Still, core inflation picked up to 2.7 per cent in August, after falling to 2.5 per cent in July, its lowest since 2022 in July.

The recent surge in global crude oil prices as the conflict in the Middle East escalates threatens to upend some of the gains in the fight against inflation.

Higher oil prices can drive up prices of products made out of it, such as petrol, diesel, jet fuel and fuel oils used in ships. With a lag, oil prices also influence the cost of coal and natural gas - the dominant fuels in power generation.

A sustained increase in transport and electricity costs can make virtually everything more expensive and bump up the cost of living and doing business.

Crude has risen by about 8 per cent or US$10 per barrel in the past few weeks amid speculation that Israel will target the petroleum infrastructure of Iran - the world’s fourth top oil exporter.

However, given current of more supply than demand in the oil market, crude prices, as represented by the global benchmark Brent, can quickly fall back their two-year low of US$69.19 recorded on Sept 10.

Still, given the highly unpredictable situation in the Middle East, policymakers may see higher oil prices as a risk worth consideration in setting monetary policy.

Ms Selena Ling, chief economist and head of global markets research and strategy at OCBC, said: “The latest developments in the Middle East have heightened market uncertainties, ... and translated to upward pressure on crude oil prices. If sustained, this could potentially reignite upside inflation risks and possibly constrain the global monetary policy cycle.”

“For the upcoming MAS policy decision, the status quo is likely to be maintained given current two-sided inflation risks,” she said.

Source: Straitstimes

The September CPI report came in slightly hotter than expected, but not enough to meaningfully change the outlook for U.S. inflation. Headline CPI rose 0.2% in the month, while excluding food and energy prices consumer price inflation was a tenth stronger at 0.3%. A 4.1% drop in gasoline prices helped restrain overall inflation, although a 0.4% rise in grocery store prices served as a partial offset to the respite at the pump. Core goods prices rose 0.2%, ending a six-month streak of goods deflation. Higher prices for new and used vehicles as well as apparel were the culprits for the increase in core goods prices. On the services side, slower inflation for shelter costs in September was offset by a jump in prices for airfares, motor vehicle insurance and medical care.

Today’s data bring the year-ago change in the core CPI to 3.3%, with prices over the past three months increasing at a 3.1% annualized rate. For context, core CPI inflation averaged 2.2% in 2019, suggesting that the underlying pace of inflation at present is about one percentage point above what prevailed before the pandemic. Looking ahead, we expect the disinflation trend to continue, albeit gradually rather than sharply. The ongoing cooling in the labor market and lagging service sector components should help reduce core inflation a bit further in the months ahead. As a result, we expect the FOMC to continue normalizing monetary policy. We still anticipate two 25 bps rate cuts from the Federal Reserve at the two remaining FOMC meetings of the year.

Inflation Still Cooling on Trend

The bumpy ride to slower inflation continued in September. Overall consumer prices rose 0.2%, which was a tick higher than the Bloomberg consensus. Despite the somewhat larger-than-expected outturn, prices over the past year are up 2.4%, which marks the lowest one-year change in consumer prices since February 2021.

Consumers received some respite at the pump in September, with gasoline prices falling 4.1% last month. However, grocery store prices picked up sharply, increasing 0.4%. This was the largest monthly gain in nearly two years and was driven by a jump in egg prices (+8.4%) and the relatively volatile food component of fruits & vegetables (+0.9%). Even with September’s jump, prices for food at home have risen 1.3% over the past year, down from a 12-month pace of 2.4% this time last year and a recent peak of 14% in the summer of 2022.

Excluding food and energy prices, core CPI came in at 0.3% (0.31% unrounded). This was modestly higher than we expected. Core goods prices rose 0.2% in the month, halting a six-month streak of deflation for prices in the goods sector. Small increases for prices of new and used vehicles contributed to the move higher, as did a 1.1% increase in apparel prices. Lower prices for medical care goods and recreation goods helped keep the increase in core goods prices in check.

Core services inflation was 0.4% in September (0.36% unrounded), a modest cooldown from the 0.41% pace registered in August. The drivers of services inflation in September were much different from what took place the prior month. Owners’ equivalent rent came in at 0.3% in September, reversing the puzzlingly-strong 0.5% reading in August. Rents rose 0.3%, a tenth slower than September. However, outside primary shelter, services inflation jumped on the back of higher prices for airfares (+3.2%), motor vehicle insurance (+1.2%) and medical care services (+0.7%). Looking through the month-to-month noise, the underlying trend in core services inflation in recent months seems to have been between 0.3% and 0.4%, about a tenth or so stronger than the monthly pace that prevailed before the pandemic. Overall core CPI inflation has risen at a 3.1% annualized pace over the past three months, slightly below the year-ago pace (+3.3%) and about a percentage point faster than core CPI inflation in 2019.

The September CPI report is consistent with our view that, while the overall trend in core inflation remains lower, further improvement is likely to be slower-going. The deflationary impulse to goods prices has waned with supply chain pressures no longer receding and inventories largely replenished. The downdraft to overall inflation from food and energy also has weakened, with the risks to energy costs for the time-being seeming to lie to the upside. However, we look for services inflation to continue to slow as housing inflation eases further and service providers benefit from tamer input cost growth for goods and labor.

While the next leg lower in inflation may take more time, the good news is that with the jobs market remaining in good shape and solid growth in productivity, average hourly earnings growth, up 4.0% over the past year, continues to outpace inflation. Thus, we do not see slower improvement on the inflation front as an impediment to real spending and output.

While today’s inflation report may make some of the more hawkish members of the FOMC somewhat more reluctant to ease monetary policy further at the Committee’s next meeting on November 7, we do not believe it is strong enough to warrant a pause. With inflation continuing to slow on trend and upward pressure on prices dissipating amid a cooler labor market and encouraging trends in productivity, there is still likely scope in the near term for policy to “recalibrate” further.

USD: Looking outside of the US

The latest batch of US data has sent contrasting signals to the Federal Reserve and to the markets. CPI inflation was hotter than expected and the core rate re-accelerated from 3.2% to 3.3% year-on-year on the back of a second consecutive 0.3% month-on-month print. In other circumstances, we would have seen a dollar rally, but there are at least two sets of factors that have capped the FX reaction.

Markets and the Fed are laser-focused on the jobs market, and CPI prints have a smaller impact. The surprise rise in jobless claims might be due to extreme weather events but had a noticeable negative impact on the dollar

The room for further dovish repricing is limited. Markets are pricing in 45bp of easing by year-end, so slightly less than two 25bp reductions. Three FOMC members (John Williams, Austan Goolsbee, Tom Barkin) have largely shrugged off the hotter CPI print, with only the hawk, Raphael Bostic, open to a pause in easing.

We made a case earlier this week for the link between rates/data and the dollar to soften into the US election. Yesterday’s moves seem to endorse such dynamics, and with market pricing for the Fed now likely to prove sticky on both sides, we’ll be monitoring more closely the external environment rather than US data like today’s PPI.

Oil volatility remains central. Crude prices are facing some large daily swings while awaiting Israel’s retaliation against Iran, which could lead to disruptions in supply. Israel's defence minister said the nation’s next move will be “above all surprising”, and Iran has already pledged to strike back should it be attacked, which is probably contributing to the uncertainty and the general sense it will take some time for tensions to de-escalate. We suspect this will continue to offer support to the dollar in the near term.

Another non-US development to follow is tomorrow’s announcement of new stimulus measures in China. The consensus for the size of the package is around 2tn yuan, but the market reaction will probably depend more on the targets of extra spending, with any boosts to consumption probably being favoured. Even in the case of a positive reaction, we are not sure markets are ready to take USD/CNY below 7.0 before the US election. Ultimately, the negative impact on the dollar may be contained. A strengthening into 103.50 in DXY remains possible in the near term.

EUR: Awaiting some help from Beijing

EUR/USD has stabilised in the 1.09-1.10 range, but continues to face downside risks as a USD:EUR two-year swap rate gap at 130bp is consistent with sub-1.09 levels, and Middle East tensions can easily add to the negatives for the pro-cyclical, oil-sensitive EUR. Weekend developments in China will likely be important for EUR/USD’s tactical picture given the euro tends to have a good response to positive China developments. Good news from Beijing can help build a floor at 1.090 early next week.

The eurozone calendar is not offering many market inputs for the time being, and the ECB is in a quiet period ahead of next week’s meeting. The latest ECB minutes did not give many insights about the October meeting, especially in light of recent inflation data surprises. While arguments against a rate cut shouldn’t be entirely dismissed, it would now take quite a lot of courage from the ECB to hold, given markets and the consensus are fully aligned for a 25bp reduction.

Elsewhere in Europe, the UK released some slightly softer-than-expected growth figures for August, with 3M/3M GDP having slowed to 0.2%. Industrial production for the same month came in quite soft, at -1.6% YoY. This is all second-tier data for the Bank of England and sterling has barely budged, but they might be contributing to the recent narrative that a dovish repricing in the Sonia curve is overdue. Still, some encouraging news on services CPI next week is needed to take EUR/GBP sustainably back above 0.84.

CAD: Jobs data can help hawkish repricing

Canada releases jobs figures for September today, and the consensus is centred around a solid 27k employment print, with unemployment inching up from 6.6% to 6.7%. If the numbers prove to be close to consensus, we doubt the Bank of Canada will be rushed into a 50bp cut later this month. Markets are pricing in 48bp for 23 October meeting and 70bp in total by year-end, which looks a bit overblown on the dovish side, in our view.

Accordingly, we see some room for hawkish repricing to offer help to the Canadian dollar, which has remained under pressure against USD despite higher oil prices. We had previously identified room for CAD’s outperformance against other commodity currencies and could see another leg lower in AUD/CAD and NZD/CAD today before the expected Chinese stimulus story over the weekend gives some help to the antipodeans.

CEE: Central banks in hawkish mode

Yesterday's inflation figures in the region brought surprises in both directions. In Hungary, inflation surprised slightly down with a drop from 3.1% to 3.0% YoY. On the other hand, in the Czech Republic, it surprised on the upside with a rise from 2.2% to 2.6% YoY. In both countries, this is in line with the trend of surprises in recent months and our indications of risk. However, central banks are now in hawkish mode in CEE and while in Hungary this will not be a reason for a rate cut in October, in the Czech Republic it increases the probability of a pause in the cutting cycle.

This morning we got inflation numbers for September in Romania as well. Inflation fell from 5.10% to 4.62%, slightly below the 4.70% consensus. At the last meeting in October, the central bank left rates unchanged after two cuts earlier. Our economists don't expect a rate cut at the meeting in November, but weaker inflation numbers leave this topic open.

Although the first half of the week suggested stabilisation and finding ground underfoot, yesterday shows that the situation is not simple. As we have discussed here before, global risks have not changed much and CEE FX remains fragile. With higher inflation numbers in the Czech Republic, we see a chance for hawkish comments from the Czech National Bank that could support the koruna in the current uncertain environment. On the other hand, the National Bank of Hungary has already commented on the current situation, essentially ruling out a rate cut in October. However, EUR/HUF is back above 400 and not far from 402. Thus, the koruna and zloty seem to be more defensive in these conditions, while the forint, as usual, remains more sensitive to global exposure.

Source: TheGuardian