The expansion of the scope of the Sales and Services Tax (SST) is expected to increase inflation moderately, but so far, its impact on the Consumer Price Index (CPI) has been limited.
According to BIMB Securities, the increase in service prices is only noticeable in certain categories including insurance and financial services as well as restaurants and accommodation.
The firm stated that the increase in these categories is due to the SST expansion which started on July 1, 2025, but the impact is limited and temporary.
Data from the Department of Statistics Malaysia (DOSM) showed that national inflation increased slightly to 1.2% in July 2025 compared to 1.1% in June, the lowest level since February 2021.
Meanwhile, core inflation remained stable at 1.8% for three consecutive months.
The increase was driven by insurance and financial services which jumped to 5.5% compared to 1.5% in June, restaurants and accommodation rose 3.1% compared to 2.8% in June, while transportation strengthened 0.4% compared to 0.3% in the previous month.
However, several categories increased more slowly including food and beverages which fell to 1.9% from 2.1% in June, utilities which shrank to 1.3% from 1.7% in June, while personal goods fell to 3.9% from 4.2%.
The Consumer Price Index (PPI) also declined 4.2% in June 2025 after falling 3.6% in May, marking the fourth consecutive monthly decline and the lowest level since June 2023.
