Consumer Price Index Indonesia: Inflation at 0.59% in June 2018
Indonesian inflation was mild at 0.59 percent month-on-month (m/m) in June 2018, a month in which rising consumption amid the latter half of the Ramadan month and subsequent Eid al-Fitr celebrations gives rise to inflationary pressures in the world's largest Muslim-majority nation. On an annual basis, Indonesian inflation eased to 3.12 percent (y/y), down from 3.23 percent (y/y) in the preceding month.
Inflation in June 2018 was Indonesia's lowest monthly June inflation since 2015. Kecuk Suhariyanto, Head of Statistics Indonesia (BPS), said persistent low inflation in Indonesia is the result of the central government's and central bank's good work in terms of safeguarding the nation's inflation rate at a relatively low level.
Although inflationary pressures were generally mild in June, there was a marked increase in air transportation costs amid the exodus and influx of millions of people in the context of Indonesia's mudik tradition (when millions of city people visit their places of origin, usually in the regions, to spend a couple of days with their families). Meanwhile, there was also an increase in aviation fuel costs due to the higher global crude oil price.
While the price of aviation fuel has been adjusted upwards in line with the global price, the Indonesian government already stated long ago that prices of subsidized fuel and electricity will not be raised until (at least) late-2019 (a popular decision ahead of the 2018 local elections and 2019 legislative and presidential elections) despite rising global crude oil prices. Non-subsidized fuel prices, however, are adjusted upwards (albeit limited) and this could cause some additional inflationary pressures in the second half of 2018. Meanwhile, the tighter monetary policy of Bank Indonesia (which has raised its key interest rate from 4.25 percent to 5.25 percent over the past six weeks) is expected to bring growing production costs for companies; costs that may be passed on to customers by raising prices.
Although mild, prices of foodstuffs also rose. Despite rising demand for food products during the Ramadan and Eid al-Fitr celebrations, rising prices were also related to bad weather. For example, fish products experienced marked inflation in June as local fishermen were unable to fish as normal in the eastern part of the country.
Indonesia's June Inflation per Expenditure Group:
• Foodstuffs; +0.88 percent (m/m)
• Processed food, beverages, cigarette and tobacco; +0.40 percent (m/m)
• Housing, water, electricity, gas and fuel; +0.13 percent (m/m)
• Clothing; +0.36 percent (m/m)
• Health; +0.27 percent (m/m)
• Education, recreation and sports; +0.07 percent (m/m)
• Transportation, communication and financial services; +1.50 percent (m/m).
Read also: Analysis of Inflation in Indonesia
Indonesia's annual core inflation rate, which excludes government-administered and volatile food prices, eased slightly to 2.72 percent in June, from 2.75 percent in the preceding month. According to Bhima Yudhistira, economist at the Institute for Development of Economics & Finance (INDEF), retailers have been hesitant to raise prices of goods as Indonesian consumers' purchasing power may not have recovered yet. This would also explain why Indonesia's core inflation has been relatively low.
Year-to-date, Indonesian inflation has accumulated to 1.90 percent in the first six months of 2018. Therefore it is expected that the year-end figure will be well within the central bank's full-year 2018 inflation target range of 2.5 - 4.5 percent (y/y), despite some additional inflationary pressures in the second half of 2018.
Inflation in Indonesia:
| Month | M/M Growth 2018 |
| January | 0.62% |
| February | 0.17% |
| March | 0.20% |
| April | 0.10% |
| May | 0.21% |
| June | 0.59% |
| Year-to-Date | 1.90% |
Headline Consumer Price Index of Indonesia:
| Month | M/M Growth 2013 |
M/M Growth 2014 |
M/M Growth 2015 |
M/M Growth 2016 |
M/M Growth 2017 |
| January | 1.03% | 1.07% | -0.24% | 0.51% | 0.97% |
| February | 0.75% | 0.26% | -0.36% | -0.09% | 0.23% |
| March | 0.63% | 0.08% | 0.17% | 0.19% | -0.02% |
| April | -0.10% | -0.02% | 0.36% | -0.45% | 0.09% |
| May | -0.03% | 0.16% | 0.50% | 0.24% | 0.39% |
| June | 1.03% | 0.43% | 0.54% | 0.66% | 0.69% |
| July | 3.29% | 0.93% | 0.93% | 0.69% | 0.22% |
| August | 1.12% | 0.47% | 0.39% | -0.02% | -0.07% |
| September | -0.35% | 0.27% | -0.05% | 0.22% | 0.13% |
| October | 0.09% | 0.47% | -0.08% | 0.14% | 0.01% |
| November | 0.12% | 1.50% | 0.21% | 0.47% | 0.20% |
| December | 0.55% | 2.46% | 0.96% | 0.42% | 0.71% |
| Total | 8.38% | 8.36% | 3.35% | 3.02% | 3.61% |
Source: Statistics Indonesia (BPS)
Inflation in Indonesia and Central Bank (BI) Target:
| 2014 | 2015 | 2016 | 2017 | 2018 | |
| Inflation (annual % change) |
8.4 | 3.4 | 3.0 | 3.6 | |
| BI Target (annual % change) |
4.5 | 4.0 | 4.0 | 4.0 | 3.5 |
| 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |
| Inflation (annual % change) |
9.8 | 4.8 | 5.1 | 5.4 | 4.3 | 8.4 |
| BI Target (annual % change) |
5.0 | 4.5 | 5.0 | 5.0 | 4.5 | 4.5 |
Source: Bank Indonesia
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