Consumer Price Index (CPI) in September 2016 increased due to the rise in car price, mobile phone tariff, tuition fee, and electricity rates. Furthermore, monthly inflation increased

Monthly Inflation:”Remain Under Control”

CPI Review

Consumer Price Index (CPI) in September 2016 increased due to the rise in car price, mobile phone tariff, tuition fee, and electricity rates. Furthermore, monthly inflation increased by 0.22% m-o-m from deflation 0.02% m-o-m in the preceding month. Based component, the inflation was posted by the transportation and communication component increased by 0.19% m-o-m and the housing component experienced rose by 0.29% compared to preceding month.  Meanwhile, the prepared food component rose by 0.34% m-o-m and the education, recreation, and sports component increased by 0.52% m-o-m. Moreover, the medical care component increased by 0.33% m-o-m and the clothing component rose by 0.13% m-o-m. Meanwhile, the deflation was still posted by the foodstuffs component decreased by 0.07% m-o-m.

Inflation in the transportation and communication component in September 2016 came primarily from higher prices of car and mobile phone tariff.

Meanwhile, inflation in the prepared foods component in September 2016 mainly stemmed from higher prices of rice with meal, cigarette, white cigarette, and filter cigarette. Inflation in the education, recreation and sports component in September 2016 mainly stemmed from higher prices of tuition fee (Universities/Academy). Inflation in the housing component in September 2016 still came primarily from higher prices of electricity rates, PAM water tariff, housing rents, and housing contracts.

Moreover, inflation in the medical care component in September 2016 still came primarily from higher price of body care services and cosmetics sub-sector. Inflation in the clothing component in September 2016 came primarily from higher prices of women clothing sub-sector.

Deflation in the foodstuffs component in September 2016 mainly stemmed from lower prices of eggs, chicken meat, carrot, chili, spinach, potato, and tomato. We believe the price decrease in these products were mainly due to

a.   Higher domestic supply

b.   Lower domestic demand

On a yearly basis, inflation remains in check with the upward trend still intact, as the inflation increased to 3.07% y-o-y in September 2016 compare 2.79% y-o-y in the previous month. Furthermore, year to date inflation in January–September 2016 reached 1.97% lower than 2.24% for the same time frame in 2015.

CPI Outlook

We expect inflation remains under control and a slight rise in October 2016. Price pressure occurs due to the increasing of TOL road tariff and rail tariff. In addition, price increases also occurred in the price of foodstuffs such as rice, chili, red pepper, instant noodles, milk, and cooking oil. Furthermore, the prices of car, housing rent, and housing contract still experienced an increase. Meanwhile, some food commodities are still declining as onion, beef, chicken, eggs, and soybean. Based on these factors, we expect the consumer price index in October 2016 may slightly increase 0.07% m-o-m lower than in September 2016 which reached inflation 0.22% m-o-m. Furthermore, we expect the yearly inflation rate in October 2016 will increase to 3.23% y-o-y from 3.07% y-o-y in September 2016. Looking ahead, we also expect inflation may reach 3.15% y-o-y by the end of 2016 and 4.01% y-o-y by the end of 2017.

Meanwhile, we expect monthly core inflation remain benign in October 2016. Core Inflationary pressure was still caused by rising prices of car, housing rent, housing contract, rail tariff, and TOL road tariff. We expect core inflation in October 2016 may reach 0.30% m-o-m lower than 0.33% m-o-m in September 2016. However, we expect the yearly core inflation in October 2016 will increase to 3.28% y-o-y from 3.21% y-o-y in the previous month. Forward looking, we also expect core inflation may reach 3.40% y-o-y by the end of 2016 and 3.50% by the end of 2017.

Regards,