Indonesia: Inflation picks up pace in January – UOB

Economist at UOB Group Enrico Tanuwidjaja reviewed the recently published inflation figures in Indonesia.

Key Quotes

“Indonesia’s inflation print for January 2020 came at 2.68% y/y, picking up from 2.59% y/y (revised base year) in December 2019. Headline inflation was driven by the increase prices of chilies, fish, and tobacco, which more than offset the decrease price of flight tickets and fuel. Core inflation, which exclude administered prices and volatile food prices, was recorded at 2.88%; below the market consensus (Bloomberg) at 3.00% as price pressures remain benign”.

“The inflation figure was measured using Statistics Indonesia (BPS) new methodology, which shifts the base year of consumer price index (CPI) to 2018 = 100 (from 2012 = 100 previously). The change was driven by a shift in lifestyle and development of technology, which affected the spending pattern.”

“The main features of 2018 CPI base year includes: (1) the number of city coverage was increased from 82 to 90; (2) the number of household sample was increased from 136K to 141K; (3) the number of commodities was decreased from 859 to 835; (4) the method for calculating CPI was shifted from arithmetic to geometric; and (5) the number of expenditure groups was expanded from 7 to 11 disaggregation. In addition, (6) the weight of consumption value was also changed.”

“With inflation rate still well within the central bank’s official target range of 2.0% - 4.0%, it might be an additional consideration for Bank Indonesia (BI) to cut its benchmark rate further while continuing to assess both global and domestic economy developments.”