Coordinating Minister Airlangga Says Domestic Demand Again Continuing Improvement Momentum

JAKARTA - At the end of October 2021, Indonesia's inflation remains under control and stability amid the domestic economic recovery, and rising inflation in a number of countries in the world. Actual inflation in October 2021 at 0.12 percent (mtm); 1.66 percent (yoy); 0.93 percent (ytd) or slightly below the set target range.

Meanwhile, rising inflation in several other countries was triggered by global supply chain disruptions and rising energy prices due to supply constraints. It is noted that inflation in the United States and the Euro Area increased by 5.4 percent (yoy) and 4.1 percent (yoy) respectively in September 2021.

The stable inflation rate was also supported by improving conditions in the health sector, so that people's activities returned to work and consumption rose again. In the past month, the Government has lowered the PPKM level in almost all regions as the number of COVID-19 cases has decreased.

The easing of the PPKM level status has resulted in an increase in the use of transportation modes, especially air transportation, to support community activities and mobility that are increasingly intense as usual. This condition pushed the component of Administered Prices (AP) to experience inflation of 0.33 percent (mtm), and became the largest contributor to October's inflation of 0.06 percent.

"People's activity and mobility have been steadily increasing, as reflected in the Transportation Group inflation of 0.33 percent (mtm) and contributed 0.04 percent, which was mainly contributed by the price increase in air transportation fares with a share of 0.03 percent. The decline in PPKM levels in almost all regions has encouraged people's mobility to continue to increase, although it is still limited by quite strict travel conditions," said Coordinating Minister for the Economy Airlangga Hartarto in a written statement, Tuesday, November 2.

Meanwhile, the Volatile Food (VF) component experienced inflation of 0.07 percent (mtm) and 3.16 percent (yoy), after experiencing deflation in the previous two months due to falling prices for several horticultural commodities. In October 2021, red chili actually contributed 0.05 percent or experienced inflation of 20.86 percent (mtm).

"The increase in horticultural commodities, such as chili peppers, as happened in October, we need to be aware of together, considering that the rainy season has entered which usually reduces the productivity of horticultural crops," said Coordinating Minister Airlangga.

Other food commodities that experienced price increases and contributed to inflation were cooking oil (0.05 percent) and chicken meat (0.02 percent). Meanwhile, several VF commodities that experienced price declines and contributed to deflation were broiler eggs (-0.03 percent), tomatoes (-0.02 percent), red onions, mustard greens, spinach, kale (each share was -0, 01 percent).

"However, domestic demand has continued to improve. This can be seen from core inflation which continued to contribute to inflation in October 2021 with a share of 0.05 percent, although monthly core inflation was 0.07 percent (mtm), still lower than core inflation. September 2021 by 0.13 percent (mtm)," explained Coordinating Minister Airlangga.

In addition, the improvement in domestic demand is also reflected in the Purchasing Managers' Index (PMI) reported by IHS Markit in October 2021 which was in an expansionary position at the level of 57.2. This value also increased from the previous month's position which was at 52.2.

The Indonesian PMI level illustrates the condition of business activity that has revived throughout Indonesia's manufacturing sector for the second month in a row. If you pay attention, the PMI values of other ASEAN countries are actually at an expansive level, but the numbers are still below the level of Indonesia, such as Malaysia (52.2), Vietnam (52.1), and Thailand (50.9).

The improvement in PMI levels in October 2021 is in line with the continued steady decline in COVID-19 cases. Increasing the effectiveness of pandemic control and the continuation of various National Economic Recovery Programs (PEN) are expected to be able to maintain the momentum of increasing public aggregate demand, so that it becomes an incentive to accelerate output in the manufacturing sector.

"Going forward, the government believes that the inflation target until the end of 2021 will still be maintained within the target range. The government will also continue to anticipate the transmission of rising global commodity prices by maintaining domestic supply, and ensuring smooth distribution, especially before and during National Religious Holidays ( HBKN) Christmas 2021," concluded Coordinating Minister Airlangga.