Higher-than-expected inflation causes some optimism that there has been an improvement in household consumption in Southeast Asia’s largest economy. If there has indeed been an improvement, it would be great good news for the whole economy as household consumption accounts for around 55 percent of Indonesia’s gross domestic product (GDP).

Moreover, Indonesia’s core inflation – which excludes movements in administered prices and volatile food prices – rose from 2.97 percent (y/y) in October to 3.03 percent (y/y) in November. Accelerating core inflation is usually considered a sign of strengthening consumption.

Meanwhile, on a monthly basis, Indonesia’s consumer price index (CPI) increased 0.27 percent (m/m) in November 2018. What is rather remarkable is that Indonesia’s November inflation is slightly lower than October inflation this year (last month the CPI index rose 0.28 percent m/m). Traditionally, monthly November inflation is markedly higher than October inflation in Indonesia as consumption rises ahead of the Christmas and New Year celebrations. However, for the first time in many years it is the other way around in 2018.

Indonesia's November 2018 Inflation per Expenditure Group:

• Foodstuffs; +0.24 percent (m/m)
• Processed food, beverages, cigarette and tobacco; +0.20 percent (m/m)
• Housing, water, electricity, gas and fuel; +0.25 percent (m/m)
• Clothing; +0.23 percent (m/m)
• Health; +0.36 percent (m/m)
• Education, recreation and sports; +0.05 percent (m/m)
• Transportation, communication and financial services; +0.56 percent (m/m).

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%
July      0.28%
August     -0.05%
September     -0.18%
October      0.28%
November      0.27%
Year-to-Date      2.50%


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


Inflation in Indonesia by Component:

  November
2018 M/M
November
2018 Y/Y
November
2018 YTD
General     0.27%     3.23%     2.50%
Core     0.22%     3.03%     2.90%
Government Administered     0.52%     3.07%     2.13%
Volatile     0.23%     4.32%     1.81%
Energy     0.28%     3.28%     2.91%

Source: BPS

[...]

Read the full article in the November 2018 edition of our monthly research report. You can purchase this report by sending an email to info@indonesia-investments.com or a WhatsApp (WA) message to the following number: +62.(0).8788.410.6944


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