March 2008 Inflation Outlook: Lower, but to stay above 7 percent

12 03 2008

In February 2008, the consumer price index (CPI) rose 0.65% MoM (month-on-month), after increasing by 1.77% MoM in January 2008. As such, the YoY (year-on-year) inflation rate increased slightly from 7.36% in January to 7.40% in February.

Prices rose in nearly all components of the CPI, except for the housing component that fell 0.01% in February. The component that registered the biggest increase was still the foodstuffs component (up 1.59% MoM), followed by the medical care component (up 1.56% MoM), the processed foods component (up by 0.88% MoM), the clothing component (up 2.31% MoM), the education component (up 0.04% MoM), and the transportation component (up 0.02% MoM).

The February inflation figure was lower than most economists had expected (we had expected the February inflation figure to reach 0.76% MoM). It appears that the upward pressures on rice prices have subdued somewhat with the commencement of the rice harvesting period in February. At the same time, the government has also taken some concrete steps to supply cooking oil to the market by intensifying market operations. As such, the increases in cooking oil prices were not as much as expected before. In addition, the government’s program to encourage people to use gas rather than kerosene for household usage has also helped to reduce the problem of kerosene scarcity in some regions.

Looking ahead, we expect the harvesting of rice to put downward pressures on rice prices in March. And we also expect the government to continue its market operations. This should help ease upward pressures on basic foodstuff prices. Furthermore, the lifting of import fees on some basic foodstuffs in the near term will also help to lessen the upward pressures on basic foodstuff prices in the near future. In addition, the currently strong rupiah will also help to reduce the prices of imported goods. As such, we expect monthly inflation to be lower in March than in February.

Against this backdrop, we predict that inflation will reach 0.09% MoM in March 2008, with the YoY inflation rate falling slightly to 7.24%. For the whole of 2008, we expect inflation to reach 6.12%. Download Report

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February 2008 Inflation Outlook: To stay above 7 percent

14 02 2008

In January 2008, the consumer price index (CPI) rose 1.77% MoM (month-on-month), after increasing by 1.10% MoM in December 2007. As such, the YoY (year-on-year) inflation rate increased from 6.59% in December to 7.36% in January.

Prices rose in all components of the CPI. The biggest increase was posted by the Foodstuffs component (up 2.77% MoM), followed by the clothing component (up 2.31%), the processed foods component (up by 2.02% MoM), the housing component (up 1.80% MoM), the medical care component (up 0.72% MoM), the transportation component (up 0.24% MoM), and the education component (up 0.10% MoM). Read the rest of this entry »





January 2008 Inflation Outlook: Unstable Rice Prices!

9 01 2008

indonesia flood

In December 2007, the consumer price index (CPI) shot up 1.10% MoM (month-on-month), after a 0.18% MoM rise in November. As such, the YoY (year-on-year) inflation rate fell slightly from 6.71% in November to 6.59% in December.

Prices rose in all components of the CPI. The largest increase was seen in the Foodstuffs component (up 2.47% MoM), followed by the clothing component (up 0.99% MoM), the housing component (up by 0.63% MoM), the processed foods component (up 0.91%), the medical care component (up 0.41% MoM), the transportation component (up 0.22% MoM), and the education component (up 0.12% MoM).

The December inflation figure was higher than we had expected. We knew that seasonality factors (Christmas and New Year) would push up the price of rice in December. Nonetheless, we did not expect foodstuff prices (especially rice prices) to increase as sharply as they did. In the previous year, the price of rice climbed higher due to the long dry season that delayed rice planting and led to rumors of rice scarcity. Also, the government agency responsible for maintaining the sustainability of the rice supply (Bulog) was apparently ill prepared to deal with the problem. Furthermore, rice imports could not be conducted in a timely manner due to the lengthy debate over whether such a policy would hurt the country’s rice farmers. Read the rest of this entry »





Inflation Outlook November 2007

13 11 2007

After rising by 0.80% in September 2007, October inflation came in at 0.79% MoM. As such, on a YoY (year-on-on-year) basis, prices rose 6.88% in October from 6.95% in September.

Prices rose in all components of the CPI. The biggest increase was posted by the clothing component (up 2.05%, significantly higher than its level in September of 1.22% MoM), followed by the foodstuffs component (up 1.87% vis-à-vis 1.81% in September), the processed foods component (up by 0.51% vis-à-vis 0.45% in September), the transportation component (up by 0.47% vis-à-vis 0.07% in September) and the housing component (up from 0.18% to 0.21%). However, inflation was lower in the medical care component (down from 0.45% to 0.44%), the education component (down from 1.70% to 0.21% MoM) and the housing component (down from 0.1% to 0.23% MoM). Read the rest of this entry »





Indonesia Inflation Outlook Oct 2007

31 10 2007

To Remain High

In September 2007, the consumer price index (CPI) rose 0.80% MoM (month on-month), after rising 0.75% MoM in August 2007. As such, the YoY (year-onyear) inflation rate rose to 6.95% in September from 6.51% in August.

Prices rose in all components of the CPI: the foodstuffs component rose by 1.81% MoM, the education component by 1.70% MoM, the clothing component by 1.22% MoM, the processed foods component by 0.45% MoM, the medical care component by 0.44% MoM, the housing component by 0.18% MoM, and the transportation component by 0.07% MoM.

The inflation figure in September was slightly above our expectations (we had expected inflation in September to reach only 0.62% MoM). While we had anticipated the significant increase in the education component (due to the beginning of the new academic year for universities) and in the clothing component (due to the impact of Ramadan), the increase in the foodstuffs component was greater than expected. Besides the impact of Ramadan, we also believe that hikes in toll road tariffs and surging cooking oil prices have given traders an excuse to jack up their selling prices to an excessively large degree.

Looking ahead, we expect the month-on-month inflation figure to remain high in October. Seasonal factors are likely to continue putting upward pressures on general prices in this month. Note that prices typically rise over the Ramadan and Lebaran period due to the strong demand for foodstuffs, prepared foods, and clothing. In addition, prices in the transportation component are likely to tick up in October since transportation companies are allowed by the government to hike their fares several days prior to, as well as after, the Lebaran festivities.

Against this backdrop, we predict that inflation will reach 0.87% MoM in October 2007, with the YoY inflation rate rising to 6.96%.

Over the next several months the year-on-year inflation figure is likely to hover close to 7.0 percent. We still believe, however, that there is a good chance that the year-on-year inflation figure shall fall significantly in December to around 6.25%. Note that in December 2006 there was an upward shock from rice prices due to the extended dry season. Thus, if the government can anticipate rice scarcity this year (should a extended dry season take place) and import rice several months in advance, then a similar shock should be avoided. Indeed, signs are that the government has already started to import rice in various qualities several months in advance. As such, a rice price shock is not likely to occur in December. We therefore expect a rather sharp downward adjustment in the year-on-year inflation figure in December. CPISBIOutlook-Oct07





Deflation ?

27 04 2007

In March 2007, the consumer price index (CPI) rose 0.24% MoM (month-on-month), after its 0.62% MoM rise in February 2007. As such, the YoY (year-on-year) inflation rate edged up from 6.30% in February to 6.52% in March.

Prices rose in all components of the CPI. The highest increase was posted in the clothing component (up by 0.41% MoM), followed by the processed foods component (up 0.36%), the housing component (up by 0.29% MoM), the medical care component (up 0.20% MoM), the foodstuffs component (up 0.16% MoM), the transportation component (up 0.09% MoM), and the education component (up 0.03% MoM).

The March inflation figure is higher than we had first expected. Initially, we had expected deflation in March (before we revised up our forecast in the middle of the month), mainly on the back of government intervention in the rice market. By making efforts to ensuring an adequate supply of rice to the domestic market – through rice imports – the government had hoped to get rice prices under control. But because of limited stocks of rice in their warehouses, the government’s efforts were not as successful as we had first expected. As a result, deflation did not occur in March. Nevertheless, rice prices did decline to some extent, thereby limiting inflation in the foodstuffs component in that month. As a result, prices in the foodstuffs component only rose by 0.16 percent in March, or significantly lower than the 0.84 percent increase in February.

Looking ahead, we still expect seasonality factors to put downward pressures on prices in April. The harvesting season will peak in April, exerting further downward pressure on rice prices. As such, we expect the monthly inflation figure to be lower in April than in March. And considering that rice prices have not fallen significantly from their level in December, the likelihood is high that rice prices will fall sharply in April, thereby giving rise to overall deflation. Get the full report.