ECONOMIC PULSE: Price Indices and Manufacturing PMI August 2, 2017

The absence of any near-term inflationary pressure persisted in July as demand normalized after Eid al-Fitr holidays. Meanwhile the plight of Indonesia’s manufacture sector endures.

The headline Consumer Price Index (CPI) eased to 3.88% (Y/Y) in July from 4.37% (Y/Y). On a monthly basis, the inflation rate was 0.22%, slower than 0.69% reading in June driven by Processed Food, Beverage and Tobacco (FB&T) with a 0.57% increase and 0.10% contribution to last month overall inflation rate. Education, Recreation and Sports (+0.62% MtM) followed in not so distant second place with contribution of 0.05%.

Basic (Unprocessed) Foods rose 0.21% (MtM), propped up by Vegetables (+1.94%). Both Housing, Water, Electricity, Gas and Fuel group and Clothing group rose 0.06% (MtM) respectively.

The only expenditure group that registered deflation was Transportation, Communication and Financial Services (-0.08% MtM).

For the calendar year (January – July) inflation rate stood at 2.60%, quite low so as to gives Bank Indonesia ample room to pursue neutral monetary policy amid a hawkish prospect of U.S. Fed Reserve monetary policy.

Core inflation continued to slow from 3.13% (Y/Y) in June to 3.05% (Y/Y), nearly touching the lower band (3%) of Bank Indonesia’s inflation target range and an indication of weaker consumer purchasing power. Government-controlled price barely increase, rising minuscule 0.07% (+9.3% Y/Y) whereas volatile food price cooled to 0.17% (+1.13% Y/Y) from 0.69% in previous month.

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