- Riset Terkini
|CPI & SBI Outlook November 2014|
|November 27, 2014 14:54|
Inflationary pressures began to rise in October. After posting benign inflation of 0.27 percent MoM in September, October’s MoM inflation accelerated to 0.47 percent. Nonetheless, on a yearly basis, inflation reached only 4.83 percent. And cumulatively, in the January-October period, headline inflation only reached 4.19 percent, or far lower than last year’s 7.42 percent.
All CPI components rose in October. The housing component (+1.04 percent) and the medical care component (+0.60 percent) recorded the largest MoM increases. The other components also posted increases: the prepared foods component rose 0.43 percent, the foodstuffs component edged up 0.25 percent, the education component climbed 0.23 percent, the clothing component added 0.21 percent, and the transportation component rose 0.16 percent.
In November, the government finally bit the bullet and hiked subsidized fuel prices to create a more sustainable state budget. Through this policy, the price of subsidized premium gasoline was raised from IDR 6,500/liter to IDR 8,500/liter, while the price of diesel fuel was upped from IDR 5,500/liter to IDR 7,500/liter. The price of subsidized kerosene was kept unchanged at IDR 2,500/liter. In our estimates, the government’s decision to hike fuel prices by 32 percent on average will create additional inflation of 2.2 percent, meaning that the inflation rate will reach around 7.4 percent at the end of 2014.
To cushion the impact of the fuel price hikes, the government provided social assistance to low income families through several socialprotection cards, i.e. the Indonesia Health Card (KIS), the Indonesia Smart Card (KIP) and the Prosperous Family Card (KKS). .. For November, given the absence of seasonal factors, heightened inflationary pressures will be driven by the government’s decision to hike subsidized fuel prices. Indeed, inflationary expectations already increased ahead of the fuel price hikes with the prices of several types of commodities heading higher. Then, after the announcement, increases in transportation fares and the prices of some goods followed. In our estimate, the full impact of the fuel price hikes will be seen in the December inflation figure.
Against this backdrop, we predict inflation of 1.29 percent MoM in November, translating into YoY inflation of 6.01 percent.