Indonesia’s headline inflation eases to 1.55% in November
Several sectors are seeing smaller price increases, including housing, recreation and culture, education, and health
[JAKARTA] Indonesia’s annual inflation eased to 1.55 per cent in November, down from the previous month, according to data released by the Statistics Agency on Monday (Dec 2). Analysts suggest that the reduced inflation reflects ongoing weak demand in South-east Asia’s largest economy.
November’s headline inflation came in slightly above the average forecast of 1.50 per cent by analysts surveyed by Reuters, but still remains within the lower end of Bank Indonesia’s target range, which ranges from 1.5 percent to 3.5 per cent.
Several sectors saw narrower price increases, including housing, recreation and culture, education, and health, all of which experienced lower inflation compared to the previous month.
Meanwhile, telecommunication prices continued their deflationary trend, falling by 0.28 per cent.
Analysts suggest that the slowdown in inflation reflects the ongoing weakness in household consumption, driven by a drop in consumer confidence and five straight months of contraction in the manufacturing sector.
“This has stalled growth in the formal sector and, in turn, dampened demand,” said Fithra Faisal, senior economist at Samuel Sekuritas.
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Meanwhile, core inflation, which excludes government-controlled prices and volatile food prices, rose to 2.26 per cent last month.
On a monthly basis, November inflation rose by 0.30 per cent, marking the sharpest increase in eight months and signalling renewed demand pressures during the year-end festive season.
Amalia Widyasanti, the acting head of the statistics agency, highlighted that certain food prices, such as red onions and tomatoes, have begun to rise as demand picks up.
Josua Pardede, chief economist at Bank Permata, projects a gradual rise in food prices as the impact of the harvest season wanes, leading to an overall increase in food prices.
Analysts anticipate a rise in Indonesia’s inflation next year, following the government’s decision to hike the VAT from 11 per cent to 12 per cent, starting January 1.
Indonesia has seen modest inflation throughout the year, allowing Bank Indonesia to reduce its interest rate to 6 per cent in September.
Yet, the surprise victory of Donald Trump in the US presidential election has prompted the central bank to exercise caution, wary of potential rupiah fluctuations.
The uncertainty surrounding Trump’s trade policies has added a layer of complexity to the outlook of Bank Indonesia (BI), keeping it on alert for shifts in the currency market.
BI Governor Perry Warjiyo said last Friday that the central bank’s short-term policy focus is on maintaining rupiah stability, as global uncertainties remain elevated.
Global dynamics, along with persistently weak consumption, are posing significant challenges for the government in achieving its 5 per cent economic growth target for this year.
Samuel Sekuritas projects that Indonesia’s growth will likely fall slightly short, at around 4.95 per cent.
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