Malaysia’s PPI Decline Moderates Amidst Sectoral Shifts
Malaysia’s Producer Price Index (PPI), which serves to measure price changes experienced at the producer level, registered a notably smaller year-on-year decline of 2.8 percent in August 2025, a significant moderation when compared to the sharper 3.8 percent decrease recorded in the preceding month of July 2025, according to the Department of Statistics Malaysia (DOSM).
Its chief statistician, Datuk Seri Dr Mohd Uzir Mahidin, indicated that the sustained decline in August, which mirrored the preceding month, was primarily attributable to persistent deflationary pressures within the manufacturing and mining sectors.
He detailed the manufacturing sector’s performance, stating that it posted a substantial four percent decrease, a figure unchanged from its July 2025 performance.
This decline was largely driven by lower price indices for the manufacture of coke and refined petroleum products, which saw a sharp fall of 14.9 percent.
Additionally, the manufacture of computer, electronic, and optical products contributed negatively, declining by 7.7 percent.
Understanding the movements in the PPI is critical for assessing inflationary pressures at the wholesale level before they potentially trickle down to consumer prices.
The data highlights that while overall price contractions persisted, the rate of decline slowed, suggesting a gradual easing of deflationary forces in the Malaysian economy.
The stability of the manufacturing decline, despite the smaller overall PPI drop, signals continued softness in global commodity and electronics demand affecting Malaysian producers.
Mixed Sectoral Trends Drive Moderated PPI Contraction
The overall moderation in the contraction of the PPI was a result of divergent trends across Malaysia’s key economic sectors, where sharp declines in mining and manufacturing were offset by robust price increases in the agriculture and utilities segments.
The mining sector saw its price index fall by 3.4 percent in August 2025, a much less severe contraction compared to the significant 8.7 percent decline witnessed in July.
This sectoral reduction was primarily weighed down by the ongoing reduction in the prices for the extraction of crude petroleum, which fell by 5.1 percent.
Conversely, the agriculture, forestry, and fishing sector recorded a strong reversal, seeing a significant increase of 7.3 percent in August 2025, a sharp acceleration from the modest 1.1 percent rise in July.
This positive surge was specifically driven by the growing perennial crops segment, which increased by 11.6 percent.
Concurrently, the utilities sector also registered notable gains, with both the electricity and gas supply segment rising by 4.1 percent and the water supply segment increasing by 3.4 percent.
These positive movements in agriculture and utilities acted as crucial stabilizing factors, counterbalancing the significant negative pressure exerted by the manufacturing and mining components on the aggregate PPI figure.
On a month-on-month basis, the PPI for local production edged up slightly by 0.1 percent in August 2025, following a 0.3 percent rise in the previous month, indicating minimal sequential growth in producer prices.
Stage of Processing Reflects Persistent Downward Trend
Analyzing the Producer Price Index by its stages of processing provides deeper insight into the structure of the price contractions, revealing that the downward trend observed since earlier in the year has continued across all major categories.
Mohd Uzir Mahidin highlighted that when segmented by stage of processing, all key categories recorded synchronized year-on-year decreases in August 2025.
This extended the persistent downward trend that has been in effect since March 2025, illustrating a broad-based weakness in pricing power at various points in the production chain.
This uniform decline suggests that the deflationary pressures are not isolated to raw materials or final goods but are prevalent across intermediate inputs as well.
The consistent negative readings in the PPI are typically viewed as a leading indicator, suggesting that businesses are facing reduced demand or heightened competition, which prevents them from raising or even maintaining their wholesale prices.
While the overall decline in the headline PPI rate has moderated, the fact that all processing stages are still registering contractions implies that foundational inflationary pressure remains muted in the Malaysian economy.
This data is critical for policymakers as they evaluate monetary policy settings, looking for definitive signs of price stabilization and recovery across the production sectors.
The continued monitoring of these stage-of-processing metrics will be essential to accurately gauge when the wholesale pricing environment will finally transition back towards a state of growth.
