Monthly inflation in August was limited at 0.47 percent, significantly lower than the 0.93 percent pace in the previous month. Traditionally, the months June, July and August see higher inflation due to inflationary pressures brought on by Ramadan and Idul Fitri celebrations as well as the start of the new school year. In August the impact of Islamic celebrations (Ramadan and Idul Fitri) have vanished but the new school year keeps inflation at a relatively high pace. The higher electricity tariffs contributed most to the 0.47 percent of inflation last month. Calendar year inflation now stands at 3.42 percent. On a year-on-year basis inflation eased to 3.99 percent from 4.53 percent in the previous month as the impact of last year’s higher subsidized fuel prices vanished from the annual figure. Core inflation - which excludes volatile and administered prices - climbed 4.5 percent, easing slightly from a 4.6 percentage point increase in the previous month.

Inflation in Indonesia:

Month  Monthly Growth
 Monthly Growth
January          1.03%          1.07%
February          0.75%          0.26%
March          0.63%          0.08%
April         -0.10%         -0.02%
May         -0.03%          0.16%
June          1.03%          0.43%
July          3.29%          0.93%
August          1.12%          0.47%
September         -0.35%  
October          0.09%  
November          0.12%  
December          0.55%  
Total          8.38%          3.42%

Indonesia Trade Balance July 2014

Indonesia’s trade balance swung back to a USD $124 million surplus in July 2014 (after a USD $306 million deficit in the previous month). This result was in contrast with most forecasts. Most analysts expected to see a deficit of at least USD $400 million in July. The central bank of Indonesia (Bank Indonesia) expects the current account deficit to narrow to 3.8 percent of gross domestic product (GDP) in the third quarter of 2014, down from 4.27 percent of GDP in the previous quarter.

Indonesia HSBC Markit purchasing managers’ index (PMI) of August 2014

The HSBC manufacturing PMI for Indonesia was 49.5 in August 2014, down from 52.7 in July and constitutes the lowest manufacturing pace in Southeast Asia’s largest economy since exactly one year ago. A score below 50.0 indicates contraction in manufacturing activity, whereas a score above 50.0 indicates expansion. HSBC economist Su Sian Lim was surprized to see a contraction. However, as it is only a small contraction, it may be a temporary hick up only.

New orders received by Indonesian manufacturers declined on weakening demand, effectively ending a 10-month period of growth.