Inflation in June 2014 increased by 0.43 percent (month-to-month, mtm) in accordance with the traditional pattern ahead of the holy fasting month of Ramadan and Idul Fitri celebrations. These occasions always trigger inflationary pressures as consumers increase spending. However, June inflation remains under control and is even lower than the historical average in June in recent years (0.56 percent mtm). On a year-on-year (yoy) basis, inflation stood at 6.70 percent, thus continuing the downward trend since the beginning of 2014.
As usual ahead of Ramadan, inflation is driven by volatile food inflation which reached 1.06 percent (mtm) or 6.74 percent (yoy). Commodities that showed the highest price increases were onions, garlic and chicken meat and eggs. Meanwhile, core inflation is still under control and relatively stable in the range of 0.25 percent (mtm) or 4.81 percent (yoy). This is supported by the decline in global commodity prices amid rupiah exchange rate depreciation, continued weakening demand and expectation of stable inflation. On the other hand, inflation in administered prices increased slightly to 0.45 percent (mtm) or 13.47 percent (yoy) mainly due to higher electricity tariffs for household customers with power of over 6600 VA.
The central bank (Bank Indonesia) is still positive that its inflation target of 4.5 ± 1 percent in 2014 and 4.0 ± 1 percent in 2015 will be achieved. Bank Indonesia sees possible inflationary pressures in the second half of 2014 as a result of the potential increase in food prices amid a new El Nino cycle.
Inflation in Indonesia:
|Month|| Monthly Growth
| Monthly Growth
| Inflation Rate
| Inflation Rate
| Inflation Rate
|- Administered Price||0.45||2.37||13.47|
(annual percent change)
Source: Statistics Indonesia
Trade Balance May 2014
According to Statistics Indonesia, the country’s trade balance in May 2014 recorded a surplus of USD $0.07 billion US dollars after having recorded a deficit of USD $ 1.96 billion in the previous month. The performance of the trade balance was positively influenced by the non-oil & gas balance which turned from a deficit into a surplus in May 2014. However, the oil & gas balance still recorded a deficit, even higher than in the previous month.
The non-oil & gas trade balance recorded a surplus of USD $1.40 billion compared to a deficit of USD $0.92 billion in April 2014 as non-oil & gas exports increased 6.95 percent (mtm), while non-oil & gas imports contracted 12.05 percent (mtm). The increase in non-oil & gas exports was particularly due to primary commodities (mainly fatty and animal/vegetable oils). In addition, coal exports and manufacturing exports, such as chemical products, footwear, and paper/cardboard, also increased. Regarding countries of destination, the increase in non-oil & gas exports in May 2014 was mainly supported by rising exports to China, India, and the European Union.
Meanwhile, the contraction in non-oil & gas imports was caused by a decline in imports in eight of the ten major categories of goods, such as machinery and mechanical appliances, electrical machinery and equipment, and iron and steel.
The improved performance of the trade balance in May 2014 was restrained by an increase in the oil & gas trade deficit to USD $1.33 billion from USD $1.04 billion in the previous month. The increased oil & gas deficit was influenced by a contraction in oil and gas exports amounting to 10.40 percent (mtm) due to lower exports of gas and oil products, while imports of oil & gas in fact increased 0.38 percent (mtm) due to the increase in crude oil imports.
Indonesia Balance of Trade (in USD million):