Calendar-year inflation accelerated to 1.30 percent in the January-May 2018 period. Meanwhile, Indonesia's annual headline inflation eased to 3.23 percent (y/y) in May 2018 from 3.41 percent in the preceding month. This means that inflation remains comfortably within the central bank's target range of 2.5 - 4.5 percent (y/y) that was set for full-year 2018.

Low inflation during Ramadan brings a mixed picture: on the one hand authorities can be relieved that inflationary pressures are under control despite rising crude oil prices, rupiah weakness and Ramadan-related consumption. On the other hand low inflation can also be caused by structurally subdued purchasing power of the Indonesian people. One of the reasons why Indonesia's economic growth has been stuck around the 5 percent (y/y) level is subdued household consumption (that has fallen below the 5 percent y/y mark).

Indonesia's May Inflation per Expenditure Group:

• Foodstuffs; +0.21 percent (m/m)
• Processed food, beverages, cigarette and tobacco; +0.31 percent (m/m)
• Housing, water, electricity, gas and fuel; +0.19 percent (m/m)
• Clothing; +0.33 percent (m/m)
• Health; +0.21 percent (m/m)
• Education, recreation and sports; +0.09 percent (m/m)
• Transportation, communication and financial services; +0.18 percent (m/m).

Read also: Analysis of Inflation in Indonesia

Meanwhile, Indonesia's annual core inflation rate, which excludes government-administered prices and volatile food prices, rose from 2.69 percent (y/y) in April to 2.75 percent (y/y) in May. This was partly attributed to rupiah weakness.

Inflation in Indonesia:

Month M/M Growth
      2018
January      0.62%
February      0.17%
March      0.20%
April      0.10%
May      0.21%
Year-to-Date     1.30%


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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