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Latest Reports Inflation
After a six-month period of either deflation or very low inflation (all driven by easing food prices), the month of November finally brought some more significant inflation to Indonesia as we approach the end of 2024 (meaning: arrival of the festive season).
Between May and September 2024, Indonesia had experienced a (remarkable) five-month deflation streak, driven by contracting food prices. And so, we were certainly quite interested in the latest consumer price index (CPI) data that were released by the Statistical Office of Indonesia (Badan Pusat Statistik, BPS) on 1 November 2024.
Something very unusual is happening in Indonesia (something we normally only see during crises). The latest consumer price index data released by the Statistical Office of Indonesia (Badan Pusat Statistik, BPS) show that Indonesia experienced its fifth consecutive month of deflation in September 2024.
On Friday 4 October 2024 Indonesia Investments released the September 2024 edition of its monthly report. The report discusses a range of economic, political and social topics to assess the state of the Indonesian economy.
Last month it was remarkable that Indonesia experienced three straight months of inflation (this rarely happens unless a crisis occurs). Considering August is typically a month without inflationary pressures this streak was expected to continue. Indeed, the Statistical Office (Badan Pusat Statistik, BPS) confirmed that deflation was 0.03 percent month-on-month (m/m) in August 2024.
On Friday 6 September 2024 Indonesia Investments released the August 2024 edition of its monthly report. This report discusses various economic, political and social topics that were relevant (to Indonesia) in the month of August 2024.
Again, and in contrast to our expectations, Indonesia’s consumer price index showed deflation. After 0.03 percent month-on-month (m/m) of deflation in May 2024, the latest data from Indonesia’s Statistical Office (Badan Pusat Statistik, or BPS) show a 0.08 percent (m/m) deflation rate in June 2024.
On Friday 05 July 2024, Indonesia Investments released the June 2024 edition of its monthly report. The report zooms in on the latest economic, political and social developments that (potentially) impact on the investment environment of Indonesia.
On Sunday 5 May 2024 Indonesia Investments released the April 2024 edition of its monthly report. As usual, the report zooms in on topics - relevant in the month of April 2024 - that affect the investment environment of Indonesia.
Over the past couple of months we have often expressed our concern over inflation in Indonesia, particularly low core inflation as it could signal that purchasing power is quite weak. In February 2024 we finally saw some inflationary pressures again in Indonesia with a 0.37 percent month-on-month (m/m) inflation rate.
Latest Columns Inflation
In line with expectations, Indonesia's inflation rate eased to 2.79 percent year-on-year (y/y) in August 2016, from 3.21 percent (y/y) in the preceding month. Consumer price inflation in Indonesia fell on the back of declining prices after the Islamic celebrations of Ramadan and Idul Fitri ended in July. On a monthly basis, Indonesia recorded deflation of 0.02 percent (m/m) in August. Meanwhile, the manufacturing sector of Indonesia turned positive again.
Gold investment levels in Asia continue to hold close to their all-time highs, and many regional investors are asking questions about what is next for the bullish trend in precious metals. To answer this question, it is important to take another look at old-fashioned economics as a means for determining how price valuations are likely to unfold in the future. One of the most critical economic forces in these areas is the force of market inflation, and its influence on the yellow metal can be significant depending on the underlying fundamentals present in the global economy.
The central bank of Indonesia (Bank Indonesia) expects Indonesia's inflation to reach slightly below 1 percent month-to-month (m/m) in July 2016. According to central bank surveys, Indonesia's inflation accelerated in the first and second week of July by 1.18 percent (m/m) and 1.25 percent (m/m), respectively. Juda Agung, Executive Director of Bank Indonesia's Economic and Monetary Policy Department, said inflation tends to peak ahead of - and during - the Idul Fitri holiday (4-8 July) but is set to ease in the third and fourth week.
Next week Indonesia's financial and stock markets are closed for Idul Fitri (also known as Lebaran or Eid al-Fitr), the celebrations that mark the end of the holy Islamic fasting month (Ramadan). As usual, during the Ramadan month (that started in early June) business activities in Indonesia start to slow and this slowdown will reach its "peak" during the Idul Fitri holiday, a national holiday (from Monday 4 July to Friday 8 July) when some 17.6 million Indonesians who live and work in the bigger cities will return to their places of origin for a couple of days (a tradition called mudik).
The first day of the month - in case of a working day - implies that investors can count on the release of several macroeconomic data from Indonesia, specifically inflation and manufacturing activity. Statistics Indonesia (BPS) announced this morning (01/06) that Indonesia's consumer inflation reached 0.24 percent (m/m), or 3.33 percent (y/y), in May 2016. Meanwhile, the Nikkei Indonesia Manufacturing Purchasing Managers' Index (PMI) eased to a reading of 50.6 in May from 50.9 one month earlier. Lets take a closer look at these data.
The central bank of Indonesia (Bank Indonesia) expects to see deflation in April 2016 on the back of controlled food prices as the harvest season has arrived. Bank Indonesia Governor Agus Martowardojo said a central bank survey shows deflation of 0.33 percent month-to-month (m/m) during the first three weeks of April. Besides lower food prices, Martowardojo also attributes April deflation to the government's decision to cut fuel prices (premium gasoline and diesel) by IDR 500 (approx. USD $0.04) per liter per 1 April. This move led to a 4 percent drop in public transportation tariffs.
The central bank of Indonesia (Bank Indonesia) announced on Friday (15/04) it will adopt a new monetary tool per 19 August 2016 that is to replace the existing BI rate which is considered too inefficient to influence market liquidity as it is not directly tied to Indonesia's money markets. The seven-day reverse repurchase rate (reverse repo), which stood at 5.50 percent in the central bank's last auction, is to become the nation's new benchmark. Bank Indonesia Governor Agus Martowardojo, who communicated through a teleconference from Washington DC, emphasized that the central bank will not change its monetary stance.
To assess Indonesia's purchasing power and consumer confidence it is always useful to take a look at car and motorcycle sales because when people are confident about their financial situation and have enough money to spend then they tend to buy cars and motorcycles (motorcycles are particularly popular among Indonesia's huge middle to lower-middle class segment). Meanwhile, cement sales inform about property and infrastructure development. Property development is also closely related to purchasing power and consumer confidence because property development grows when people's demand for property rises.
The central bank of Indonesia (Bank Indonesia) expects to see deflation at 0.15 percent month-to-month (m/m) in February 2016. Bank Indonesia Governor Agus Martowardojo said lower (government) administered prices in combination with low core inflation will be the recipe for deflation in the second month of the year. The lower administered prices that are primarily the cause of deflation consist of fuel prices, air fares and 12-kilogram liquefied petroleum gas (LPG) canisters. In the first month of the year Indonesian inflation accelerated to 4.14 percent (y/y).
Tomorrow (05/02), Statistics Indonesia is scheduled to release Indonesia's official full-year 2015 economic growth figure. Nearly all analysts expect to see a figure that reflects the continuation of slowing economic growth. Southeast Asia's largest economy expanded 5.0 percent in 2014 and this is expected to have eased further to 4.7 percent or 4.8 percent in 2015 on the back of (interrelated) sluggish global growth, low commodity prices, and weak export performance. Domestically, Indonesia has or had to cope with high interest rates and inflation (hence curtailing people's purchasing power and consumption as well as business expansion).
