Indonesia’s May 2024 Inflation Reaches 2.84% YoY: Food, Beverages, and Tobacco Major Contributors

Inflation in May is cooling and remains within Indonesia's cetral bank target. However rate cut is nowhere near, as Rupiah weaken against US dollar.

Indonesia's annual inflation rate for May 2024 reached 2.84% year-on-year (YoY), down from 3% in the previous month, according to the Central Bureau of Statistics (BPS). The Consumer Price Index (CPI) for May 2024 was reported at 106.37.

This rate of inflation is below the consensus expectation of 2.94% and remains within Bank Indonesia's target range of 2.5±1%.

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Key Highlights

Highest and Lowest Provincial Inflation: Central Papua recorded the highest provincial YoY inflation at 5.39%, with a CPI of 110.25. Conversely, the lowest inflation rates were observed in the Bangka Belitung Islands and West Sulawesi, each at 1.25%, with CPIs of 104.27 and 105.46, respectively.

Regency/City Inflation: Nabire Regency in Central Papua experienced the highest YoY inflation at 7.58% with a CPI of 112.25. On the other hand, the Majene Regency in West Sulawesi recorded the lowest inflation at 0.63% with a CPI of 105.87. Interestingly, West Bangka Regency saw a YoY deflation of 0.09% with a CPI of 102.47.

Contributing Factors

The annual inflation was driven by price increases in most expenditure groups:

  • Food, Beverages, and Tobacco: 6.18%
  • Clothing and Footwear: 1.10%
  • Housing, Water, Electricity, and Household Fuels: 0.54%
  • Furnishings, Household Equipment, and Routine Household Maintenance: 0.85%
  • Health: 2.06%
  • Transportation: 1.34%
  • Recreation, Sports, and Culture: 1.60%
  • Education: 1.71%
  • Restaurants and Hotels: 2.51%
  • Personal Care and Other Services: 4.99%

The only expenditure group that experienced a decline was information, communication, and financial services, which fell by 0.16%.

Prices of sugar, eggs, and rice, for instance, have been increasing due to supply disruption caused by El Nino. 

Monthly and Year-to-Date Inflation

On a month-to-month (MtM) basis, Indonesia experienced deflation of 0.03% in May 2024, compared to inflation of 0.25% in April. The year-to-date (YtD) inflation rate for May 2024 stood at 1.16%.

Core Inflation

The core inflation rate for May 2024 was 1.93% YoY, with an MtM inflation rate of 0.17% and a YtD inflation rate of 1.04%.

Market Reaction

The market responded positively to the slowing inflation rate in May 2024. On June 3, 2024, the Jakarta Composite Index (IHSG) rebounded to the 7,000 level, closing at 7.036.19, up +0.94% or 65.45 points. 

Regular market trading volume reached 165.83 million lots with a value of IDR 9.77 trillion, and trading frequency hit 951.77 thousand transactions.

Despite the positive market sentiment, the rupiah remained at IDR 16,200 per USD as of June 3, 2024. Consequently, Bank Indonesia is expected to maintain the benchmark interest rate  (the BI-rate) at 6.25% to curb further depreciation of the rupiah against the USD.