Indonesia's inflation was recorded at 0.22 percent month-on-month (m/m) in July 2017. On Tuesday morning (01/08) Indonesia's Statistics Agency (BPS) said July inflation was attributed to rising prices in most expenditure group indices, but particularly foodstuffs (+0.21 percent), processed food, beverages, cigarettes and tobacco (+0.57 percent), housing, water, electricity, gas and fuel (+0.06 percent), clothing (+0.06 percent), health (+0.15 percent), and education, recreation and sports (+0.62 percent).
Meanwhile, an expenditure group that experienced deflation was transportation, communication and financial services (-0.08 percent) in July 2017.
The 0.22 percent (m/m) inflation of Indonesia in July is actually very low. Usually, the impact of higher prices - triggered by the Ramadan and Idul Fitri celebrations - is still felt in July. The Indonesian population tends to consume more in this period (for example food items, clothes, shoes and bags). This year, however, the week-long Idul Fitri celebrations mostly fell in late-June. Moreover, Indonesia's purchasing power has remained bleak and therefore demand for various products did not rise as strongly as usual (reflected by sluggish retail sales growth in this period).
On a year-on-year basis (y/y), Indonesian inflation eased to 3.88 percent (y/y) in July, from 4.37 percent in the preceding month. Meanwhile, calendar year inflation rose to 2.60 percent (ytd). Indonesia's annual core inflation, which excludes government-administered and volatile food prices, slowed to 3.05 percent in July, from 3.13 percent in June.
The central bank of Indonesia (Bank Indonesia) set its inflation target for 2017 at the range of 3 - 5 percent (y/y). It is expected that Indonesian inflation will indeed fall within that target range (possibly right in the middle of that range). Bank Indonesia's inflation target for 2018 is slightly lower at the 2.5 - 4.5 percent (y/y) range. Recently Bank Indonesia Governor Agus Martowardojo said one of the central bank's targets (and challenges) is to push domestic headline inflation to a level that is seen in regional peers.
Martowardojo added that efforts of Indonesian President Joko Widodo to curtail inflation have been successful. These efforts include the establishment of a new inflation control team at the central and local government level. This team has made innovations and programs that have contributed to lower inflation.
Inflation in Indonesia:
Source: Statistics Indonesia (BPS)
Inflation in Indonesia and Central Bank (BI) Target 2008-2016:
(annual % change)
(annual % change)
Source: Bank Indonesia