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Trade Outlook
June 2019 Inflation Update: Prices Softened
July 02, 2019 10:23

 June’s headline inflation reached 0.55% mom, easing from 0.68% mom in May. The monthly inflation surpassed our estimate of 0.42% mom and the median consensus of 0.47% mom. Compared to the Idul Fitri period in previous years, price developments were stable. In 2017 and 2018, the inflation rate during the Lebaran month reached 0.69% mom and 0.59% mom, respectively. On an annual basis, consumer prices in June softened to 3.28% from May’s 3.32%. Prices eased in both the food component (+1.16% mom) and the non-food component (+0.13% mom).

Higher consumer spending during the Idul Fitri festivities on foodstuffs, prepared foods and clothing pushing up prices. Compared to the previous month, however, the pressure was milder thanks to easing foodstuff prices (+1.63% mom) and deflation of transportation prices (-0.14% mom). The prices of several foodstuff commodities such as red chilies, fish, tomatoes, beef, and small chilies rose at a faster pace while, by contrast, the prices of garlic, chicken meat, and eggs tended to decline. The prices of inter-city transport and airfares returned to normal since many people travel back from their hometowns and because the regulation concerning the upper limit for airfares came into effect.

Prices in the other CPI components, however, still accelerated. Prices in the prepared foods component rose by 0.59% mom followed by prices in the clothing component (+0.81% mom), housing component (+0.17% mom), medical care component (+0.19% mom), and education component (+0.07% mom). Payments of holiday allowances to housemaids as well as part-time servants contributed to increasing prices in the housing component. The clothing component, meanwhile, increased due to soaring gold and jewelry prices. Looking ahead, we remain convinced that the inflationary pressure in 2019 will stay within our target range of 3.80 – 4.20%.