Deni Ghifari, Jakarta – The annual consumer price index (CPI) rose markedly in August, after declining for five months in a row, due to higher inflation in the transportation category, as well as food, beverages and tobacco.
The latest CPI report unveiled by Statistics Indonesia (BPS) on Friday shows that annual inflation in August clocked in at 3.27 percent, up from 3.08 percent in July and much higher than Moody's Analytics' prediction of 2.9 percent.
When compared with the preceding month, however, the CPI dropped by a tiny 0.02 percent in August.
"The biggest contributor to monthly deflation was the expenditure group of food, beverages and tobacco," said BPS official Pudji Ismartini, adding that chicken, eggs and shallots in particular had contributed to the month-to-month (mtm) decline in consumer prices.
That same group, however, was also the biggest contributor to the year-on-year (yoy) CPI growth, specifically because of price increases in rice, garlic and cigarettes.
Transportation remains the largest inflation driver, and has been so for months, as prices in this spending category exceeded their year-ago level by 9.65 percent in August. Costlier gasoline and diesel, as well as higher fares are to blame.
Despite the increase in August, annual inflation remains safely within the target range set by Bank Indonesia (BI).
The central bank aims for CPI growth of between 2 and 4 percent this year and between 1.5 and 3.5 percent in 2024.
The 3.27 percent figure is lower than the 3.34 percent forecast by state-owned Bank Mandiri, which stated in a note that the increase was attributable to a so-called base effect.
This implies that the rise in August this year stemmed from a particularly low level in the reference month, August last year.
CPI growth in August 2022 stood at 4.69 percent, lower than the preceding month's 4.94 percent and much lower than the following month's 5.95 percent driven by the government's fuel price hike.
Publicly listed Bank Danamon economist Irman Faiz explained that the adjustment of subsidized fuel prices in September last year would cause another base effect in the month ahead.
This suggests that the September 2023 inflation reading should come in lower because of the spike in the reference month, September 2022.
"The uptick in headline inflation was a transient phenomenon," reads Irman's press statement released on Friday.
He asserted that there was "a notable expansion of activities" in manufacturing with the fastest pace seen in nearly a year, propelled by an accelerated increase in new orders and enhancements in capacity.
S&P Global reported that Indonesia's purchasing managers index (PMI) increased to 53.9 in August, up from July's figure of 53.3.
The report, published on Friday, is based on a survey of purchasing executives from around 400 manufacturing companies across Indonesia to determine business conditions.
The increase in the PMI score meant demand was gaining strength as the efficiency of supply chains improved, resulting in a moderation of input cost growth, said Irman.
"All in all, we maintain our stance that inflation is expected to drop below 3 percent in the fourth quarter of 2023," Irman said after pointing to an improving manufacturing sector.