Headline and core inflation remained stable

• In August, headline inflation edged lower to 1.9% (July 2024: 2%), while core inflation^[1] remained unchanged at 1.9% (July 2024: 1.9%).
• The decline in headline inflation was mainly driven by lower inflation in water supply and food away from home.

Manufacturing production remained strong in July 2024

• The manufacturing industrial production index expanded further by 7.7% in July 2024 (June 2024: 5.2%).
• Export-oriented clusters expanded further as shown in the higher production of both electrical and electronics (E&E) and primary-related products such as wood and rubber.
• Sustained growth in domestic-oriented clusters was underpinned by higher production in tobacco and positive turnaround in wearing apparel and the automotive subcluster.

Growth in credit to the private non-financial sector moderated in August

• Growth in credit to the private non-financial sector moderated to 5.3% as at end-August (July 2024: 5.5%) amid lower outstanding loan growth (5.8%; July 2024: 6.2%). Growth in outstanding corporate bonds increased to 3.2% (July 2024: 3%).
• Household loan growth was sustained at 6.2% (July 2024: 6.2%), with steady growth across most purposes, including purchase of houses and cars.
• For businesses, loan growth moderated to 5.2% (July 2024: 6%), on account of slower growth in working capital loans among non-SMEs. Notwithstanding, SME loan growth was sustained across both working capital and investment purposes.

Domestic financial markets remained largely driven by external developments, including increased expectations of US monetary policy easing

• In August, financial market participants’ expectations shifted towards the possibility of earlier and deeper policy rate cuts by the US Federal Reserve, following US economic data suggesting a slowdown in the labour market and cooling inflation.
• Against this backdrop, the ringgit appreciated by 6.7% against the US dollar (regional^[2] average: +4.2%). The 10-year Malaysian Government Securities (MGS) yield remained relatively stable, rising by a modest 4bps (regional² average: -11bps), while the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) traded higher by 3.3% (regional² average: +1.8%).

Banks’ liquidity and funding positions remained supportive of intermediation activities

• The banking system continued to record healthy liquidity buffers with an aggregate Liquidity Coverage Ratio of 145.4% (July 2024: 150.8%).
• The aggregate loan-to-fund ratio remained broadly stable at 83.8% (July 2024: 83%).

The banking system resilience continues to be underpinned by sound asset quality

• Overall gross and net impaired loans ratios remained stable at 1.6% and 1%, respectively.
• Loan loss coverage ratio (including regulatory reserves) continued to be at a prudent level of 123.8% of impaired loans (July 2024: 124.5%).

^[1] Core inflation is computed by excluding price-volatile and price-administered items.

^[2] Regional countries comprise: Singapore, Thailand, Philippines, Indonesia and South Korea.

Monthly Highlights [PDF]