In July 2024, Indonesia experienced a significant decrease in its annual inflation rate, which fell from 2.51% in June to 2.13%, in line with our lower bound forecast (2.09%) but missing the market consensus of 2.37%. This figure marks the lowest inflation rate since February 2022. The primary driver behind this decline was the moderation in food prices, which saw the smallest increase in eleven months at 3.66%, down from 4.95% in June. Inflation slowed in several other sectors. Health-related costs rose at a slower pace (1.77% vs. 1.89%), as did prices for accommodation and restaurants (2.28% vs. 2.31%), clothing (0.99% vs. 1.09%), and recreation and culture (1.49% vs. 1.50%). Prices in the communication and financial services sectors continued to decline, albeit marginally, at -0.16% compared to -0.18% in the previous month. Since these sectors serve as demand indicators of the economy, we foresee lagging consumption, in line with the decline in the consumer confidence index and the downward movement of the middle class. Following 0.08% MoM decline in June, the Consumer Price Index (CPI) unexpectedly dropped 0.18% in July, which also missed market forecasts of 0.1% rise. We observe this softer inflation materialization occured predominantly on the back of lagging 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: 4.9 %). The post Indonesia July Inflation appeared first on Samuel Sekuritas Indonesia.