[2678] How have those CPI-components behaved?

The CPI for March was released yesterday.

Malaysia’s consumer price index grew by approximately 1.6% from a year ago. It is slightly higher than the inflation rate recorded in February, which was at about 1.5% from a year ago.

You can see which components contributed to the higher inflation, as well as the price behavior of all the CPI-components from November 2012 to March 2013 below.

From the chart, you can guess which categories suffer from price controls and which ones do not: the ones with constant change are those which prices are controlled. The obvious one is the alcohol & tobacco category.

Here is the alcohol & tobacco category:

Alcohol and tobacco are subjected to punishing sin tax almost every year. The step-wise inflation rate reflects the controlled nature of the industry. It is so bad that the industry considers that if the government does not mention them during budget time, it is good news.  This happened in 2012 when the government did not increase the sin tax and hence, the prolonged zero inflation rate throughout 2012.

Nothing, really, shows the controlled nature of the category more than month-on-month rate:

Each spike in the chart above corresponds to the increase of sin tax.

The transport also appears to be controlled. After all, fuel prices are largely controlled and it is reasonable to expect inflation in this category to be stable. It does seem so on this particular scale:

But it is just a case of bad scaling. After removing the 2008 outlier caused by government’s move to liberalize part of the subsidy regime, you can see the variation clearer:

Part of the reason for the volatility in the transport category is that while fuel and public transport fee, which is part of the category, is controlled, the category also includes vehicle prices, which are not controlled. Controlled and uncontrolled items are mixed together under one roof.

Moving on, I have always wondered the reason why have clothing and footwear prices been coming down. And it is not a recent phenomenon. It has been going on for years.

The same has been going on with communication category but for communication, fierce domestic competition is pretty much the answer. You can see the competition everywhere. For clothing, it is harder to see so.

I would guess it is the magic of globalization since clothing and footwear are tradable goods, especially with China is to the north. But that sounds too simple.