Based on the latest data from Statistics Indonesia (BPS), which were released on 1 April 2019, Indonesian consumer prices continued to ease in March 2019 (in line with estimates). However, what is remarkable is that Indonesia’s annual inflation rate – 2.48 percent (y/y) in March 2019 – fell below the central bank’s target range (Bank Indonesia has set its inflation target for full-year 2019 at the range of 2.5–4.5 percent y/y). Indonesia’s latest inflation figure is the nation’s lowest inflation since December 2009. By Indonesian standards, inflation is currently remarkably low, hence it should manage to encourage household consumption.
On a month-on-month (m/m) basis, Indonesian inflation reached 0.11 percent in March 2019. Low inflation (or modest deflation) is a normal phenomenon in the month of March because the harvest season brings an ample supply of raw food products. Therefore, raw foodstuffs actually experienced deflation (-0.01 percent m/m) last month, driven by price decreases in rice, chicken meat, and fish (see table below).
So where did modest inflation come from last month? There are two answers to this question. First, generally rising prices of the processed food, beverages, cigarette and tobacco category. This category contributed most to March inflation. Second, core inflation was relatively high at 0.16 percent (m/m) last month. Core inflation is the change in costs of goods and services, but does not include those from the food and energy sectors as these items are much more volatile
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