Hammam Izzuddin, Jakarta – Deflation for five consecutive months is not the sole indicator of a declining people's purchasing power. Tauhid Ahmad, the Director of the Institute for Development of Economics and Finance (INDEF), asserted that several additional indicators signal a diminution in public consumption capacity.
Previously, the Central Statistics Agency (BPS) recorded a Consumer Price Index (CPI) of minus 0.12 percent (MtM) in September 2024, indicative of a deflationary trend persisting for five months since May 2024.
Regarding deflation, Tauhid explained that this condition is manifested in volatile food categories, such as chicken meat, eggs, and shallots, which are basic needs that maintain demand despite fluctuating prices.
"When society lacks purchasing power, it refrains from buying ultimately, leading to price decreases. This is deflation," Tauhid explained to Tempo on Thursday, October 3, 2024.
In addition to deflation, he cited the Purchasing Manager's Index (PMI) data for Indonesia's manufacturing sector, which plummeted to the contraction zone of 49.2 in September 2024. The contraction has been occurring since July.
According to him, a PMI figure below 50 in the manufacturing sector indicates that fewer goods are being sold than the inputs purchased by the industry, suggesting an excess inventory due to a shortage of buyers. Tauhid noted that this condition is not exclusive to Indonesia.
"There is data on the contraction of two-wheeled vehicle purchases, reaching minus 4.1 percent. Additionally, the credit growth rate is also negative," he added.
Moreover, factors indicative of a weakening purchasing power include a decrease in participants of the Workers Social Security Agency (BPJS Ketenagakerjaan). BPJS Ketenagakerjaan data for January 2023-May 2024 reveals a 4.27 percent decline in active participants in the garment and ready-made clothing sector.
Tauhid attributed this decrease to potential layoffs or the voluntary discontinuation of membership by informal sector participants, who pay independently rather than through companies, due to diminishing incomes.
He stated that this condition afflicts both the lower and middle classes of Indonesian society, exacerbated by the phenomenon of depleting savings.
"Examining LPS data, it appears that previously saved funds are being withdrawn to meet daily needs. Society is compelled to tighten their belts once again," he concluded.