Economic Update Indonesia: Inflation, Trade Balance & Manufacturing Activity
Statistics Indonesia (BPS) released various economic data today (01/10) - including inflation, the trade balance and manufacturing activity - that give a good indication about the state of the Indonesian economy. Although not all data was positive, market participants were content, evidenced by an appreciating rupiah exchange rate and rising Indonesian stocks. Based on the Bloomberg Dollar Index, the rupiah appreciated 0.43 percent to IDR 12,135 per US dollar, while the Jakarta Composite Index climbed 0.06 percent on Tuesday (01/10).
Indonesian September Inflation
As expected - and in line with the traditional September pace - inflation in Southeast Asia’s largest economy was modest at 0.27 percent m/m in September 2014, but accelerating to 4.54 percent on a year-on-year basis (from 3.99 percent y/y in the previous month). Inflation in September was mainly caused by higher electricity prices as well as higher processed food and beverage prices. Inflationary pressures also originated from the new school season.
Meanwhile, core inflation slowed to 4.04 percent y/y. The central bank of Indonesia (Bank Indonesia) still expects inflation to remain within its target range of between 3.5 and 5.5 percent by the year-end.
Inflation in Indonesia:
|Month|| Monthly Growth
| Monthly Growth
Indonesia’s August Trade Balance
The trade balance of Indonesia recorded a USD $318.1 million deficit (from a USD $50 million surplus in the preceding month) as oil & gas imports rose. Indonesia’s oil & gas sector posted a USD $800 million deficit in August, while the non-oil & gas sector recorded a USD $490 million surplus.
Suryamin, Head of Statistics Indonesia, stated that total exports in August amounted to USD $14.48 billion, while total imports stood at USD $14.79 billion. Cumulatively, Indonesia's trade balance in the January-August 2014 period suffers a deficit of USD $1.4 billion. For investors the trade deficit (and related current account deficit) is a problem as it puts negative pressure on the rupiah exchange rate.
Indonesian Manufacturing Activity
Market participants were relieved to see results of the HSBC Markit purchasing managers’ index (PMI) survey. The survey showed that Indonesia’s September 2014 manufacturing activity rebounded to 50.7 (from the one-year low of 49.5 in the previous month). September activity thus showed that the contraction in August was only a temporary matter, not a structural trend (a reading below 50 indicates contraction). The increase was supported by enhanced output and new orders. Su Sian Lim, economist at HSBC, said that “staffing levels declined for a second consecutive month in September, and at the quickest rate since March, as an increasing number of companies left job openings unfilled. A further deterioration in payrolls and an ongoing contraction in work backlogs suggest that manufacturing sector conditions could remain moderate over the near-term.”
Foreign Tourist Arrivals
Meanwhile, foreign tourist arrivals to Indonesia increased 7.24 percent y/y to 826,821 in August 2014, thus slowing from the 8.28 percent y/y growth pace in July 2014.
Foreign Tourist Arrivals in Indonesia - 2013-2014:
|Month|| Tourist Arrivals
| Tourist Arrivals
¹ indicates government target
Source: Statistics Indonesia (BPS)
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