Headline inflation increased to 3.3% in November

• Headline inflation increased to 3.3% in November (October: 2.9%), mainly reflecting higher inflation in the food and non-alcoholic beverages (November: 2.7%; October: 1.9%) and transport (November: 12.7%; October: 11.3%) segments.
• Underlying inflation, as measured by core inflation^[1], was also higher at 0.9% during the month (October: 0.7%), driven mainly by discretionary items (for example, food away from home), in line with the gradual reopening of the economy.
   

IPI registered faster growth of 5.5% in October

• Overall IPI recorded a faster growth of 5.5% in October driven by strong recovery in manufacturing activity and electricity generation.
• The recovery in manufacturing was driven mainly by the domestic-oriented sectors (such as food and transport), which registered broad based improvement following the reopening of the economy. Meanwhile, production of exports remained strong.
   

Continued increase in net financing growth

• Net financing^[2] growth increased to 4.4% (October: 4.0%), driven by higher growth in outstanding loans (November: 4.3%; October: 3.3%), while outstanding corporate bond growth moderated (November: 4.8%; October: 5.9%).
• Growth in outstanding household loans increased to 4.1% (October: 3.7%), amid higher loan disbursements for credit card spending and the purchase of residential properties and passenger cars.
• For businesses, outstanding loan growth increased to 4.8% (October: 3.1%) amid continued growth in outstanding working capital loans (November: 8.0%; October: 5.9%).
   

Domestic financial markets affected by concerns surrounding the Omicron variant

• In end-November, global investor sentiments were driven mainly by the emergence of a new variant of concern, Omicron, which largely outweighed concerns surrounding persistent inflationary pressures in advanced economies.
• Consequently, global bond yields, including the benchmark 10-year MGS yield, fell concurrently with the decrease in long-term US Treasury yields.
• The FBM KLCI declined by 3.1% and the ringgit depreciated by 2.0% against the US dollar, in line with most regional currencies. Weaker commodity prices amid worries surrounding the new variant had also affected the ringgit exchange rate.
   

Banking system capitalisation remains strong

• Banks remain well-capitalised to withstand potential stress and to support credit growth in the economy.
• The banking system excess capital buffers^[3] remained strong at 3 billion as at November 2021.
   

Asset quality in the banking system remained intact

• Banks continue to facilitate repayment assistance to viable borrowers facing temporary financial difficulties.
• While overall gross and net impaired loans ratios remained broadly stable at 1.5% and 0.9%, impaired loans amount recorded a marginal decline (-2.1%) compared to the previous month.
• Total provisions set aside against potential credit losses currently stand at 1.9% of total banking system loans.

^[1]  Core inflation is computed by excluding price-volatile and price-administered items. It also excludes the estimated direct impact of tax policy changes.

^[2] Refers to outstanding loans of the banking system (excluding development financial institutions (DFIs)) and outstanding corporate bonds.

^[3] Refers to total capital above the regulatory minimum, which includes the capital conservation buffer (2.5%) and bank-specific higher minimum requirements

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