Monthly Inflation:” Fueled by rising foodstuffs prices”
CPI Review
Consumer Price Index (CPI) in December 2017 increased due to the rising prices of foodstuffs, cigarette, and transportation tariff. Monthly inflation reached 0.71% m-o-m, higher from 0.20% m-o-m in the preceding month. Based component, the inflation was posted by the foodstuffs component increased by 2.26% m-o-m, the transportation, communication, and financial services component experienced rose by 0.75% m-o-m, and the prepared food component rose by 0.30% m-o-m. Furthermore, the clothing component rose by 0.13% m-o-m and the housing component experienced rose by 0.17% compared to preceding month. Moreover, the medical care component increased by 0.18% m-o-m and the education component increased by 0.07% m-o-m.
Inflation in the foodstuffs component in December 2017 mainly stemmed from higher prices of rice, fish, eggs, chicken meat, red pepper, tomato, chili, salted fish, spinach, green mustard, and carrots. We believe the price increase in these products were mainly due to
a. Lower domestic supply
b. Higher domestic demand
Meanwhile, inflation in the transportation, communication, and financial services component in December 2017 came primarily from higher prices of air freight tariff, train fares, inter-city transportation tariff, and gasoline. Inflation in the prepared foods component in December 2017 mainly stemmed from higher prices of rice with meals, cigarette, white cigarette, and filter cigarette.
Furthermore, inflation in the education, recreation and sports component in December 2017 still mainly stemmed from higher prices of courses/training sub-sector. Inflation in the clothing component in December 2017 still came primarily from higher prices of man clothing sub-sector.
Meantime, inflation in the housing component in December 2017 came primarily from higher prices of household fuel and servant wages. Inflation in the medical care component in November 2017 came primarily from higher price of medicines sub-sector.
On a yearly basis, inflation remains in check with the upward trend still intact, as the inflation slightly increased to 3.61% y-o-y in December 2017 compare 3.30% y-o-y in the previous month. Furthermore, year to date inflation in January–December 2017 reached 3.61% higher than 3.02% for the same time frame in 2016.
CPI Outlook
We expect inflationary pressures still increase in January 2018. This is mainly fueled by rising foodstuffs prices. The foodstuffs prices experience increase, such as rice, red pepper, cayenne pepper, chicken meat, beef, egg, fish, salted fish, wheat flour, and milk. In addition, the increase in cigarette excise tax, toll tariff, non subsidized fuel prices, and car prices were also add to inflationary pressure this month. Meanwhile, deflationary pressure is caused by the decrease in airplane fares, train fares, hotel rates, and inter-city transportation tariff. Based on these factors, we expect the consumer price index in January 2018 will reach 0.80% m-o-m, higher than 0.71% m-o-m in December 2017. However, we expect the yearly inflation rate in January 2018 will decrease to 3.43% y-o-y from 3.61% y-o-y in December 2017. Looking ahead, we also expect inflation may reach 3.50% y-o-y by the end of 2018.
Meanwhile, we also expect core inflationary pressures also increase in January 2018. The pressure comes from the increase in price of cigarette excise tax, car prices, toll road tariffs, housing rent, housing contract, and servant wages. We expect core inflation in January 2018 may reach 0.42% m-o-m higher than 0.13% m-o-m in December 2017. Nevertheless, we expect the yearly core inflation in January 2018 will decrease to 2.81% y-o-y from 2.95% y-o-y in the previous month. Forward looking, we also expect core inflation may reach 3.00% by the end of 2018.
Regards,
Juniman
Chief Economist
PT Bank Maybank Indonesia Tbk
Sentral Senayan III, 8th Floor
Jl. Asia Afrika No. 8, Gelora Bung Karno
Jakarta 10270, Indonesia
Tel : +62 21 29228888 Ext.29682
Fax : +62 21 29228849
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