• Slightly below our projection of 1.76%, Indonesia’s inflation in October 2024 exhibited a notable cooling, with the annual inflation rate falling to 1.71%, marking its lowest point since October 2021. A major factor in this trend has been the tempered rise in food prices, which showed the smallest increase in 15 months at 2.35%, down from September's 2.57%. This moderation can be largely attributed to well-stocked rice supplies on the back of unusually delayed harvest season that pushed yields from March to May. This delay, while non-traditional, has contributed to easing food price pressures in recent months, offering some relief to households.
• A closer look at sectoral inflation reveals a mixed but overall easing picture. Price increases in recreation and culture showed only slight moderation (1.53%, down from 1.55% in September), as did education (1.90%, down from 1.94%). Meanwhile, transport prices dipped into negative territory, dropping to -0.08% from a previous 0.92%, indicating lower fuel or logistics costs, possibly due to increased discounting to stimulate demand. However, slight upticks were seen in inflation across sectors like health (1.71%, up from 1.69%), clothing (1.20%, up from 1.18%), and accommodation services (2.36%, up from 2.25%), reflecting pockets of persistent demand or supply constraints in these areas. Prices in housing and furnishing, however, remained stable at 0.60% and 1.08%, respectively, underscoring steady demand and supply conditions in these essentials. Interestingly, communication services continued to experience deflation, holding steady at -0.28%, most likely reflecting relatively sluggish demand.
• On a monthly basis, the Consumer Price Index (CPI) saw a slight rise of 0.08% in October, marking the first monthly increase in half a year, following 0.12% decrease in September. This marginal rise indicates that, while general price levels remain restrained, specific factors—likely seasonal or temporary in nature—are influencing price movements.
• We observe this softer inflation materialization having occurred predominantly on the back of slowing consumption effect - this, coupled with below-50 PMI, is a potential obstacle to achieving the government's 5%+ economic growth target in FY2024 (SSI's projection: 4.95 %; consensus: 5.0%).