Economist Says General Inflation Continues To Slow Down

JAKARTA - Economist of the Institute for Economic and Community Research, Faculty of Economics and Business, University of Indonesia (LPEM FEB UI) Teuku Riefky said general inflation continued to slow down to 2.51 percent year on year (yoy) in June 2024, from 2.84 percent (yoy) in May 2024.

"The decline in general inflation was mainly due to a decrease in food prices after the harvest season and a low demand period after the Eid celebration in April," Riefky said, in Jakarta, quoted from Antara, Tuesday, July 16.

Six months into 2024, general inflation slowed to 2.51 percent (yoy) in June 2024, down from 2.84 percent (yoy) in May 2024. This marks the lowest general inflation rate in the last nine months and is in the middle of the BI target range of 1.5 percent to 3.5 percent.

On a monthly basis, general inflation recorded a second deflation in 2024, with a deeper deflation of 0.08 percent month to month (mtm) in June 2024 compared to 0.03 percent (mtm) in May 2024.

Similar to the annual figure, June's biggest monthly deflation contributor was the food, beverage and tobacco group, which showed deflation of 0.49 percent (mtm), contributing 0.14 percent to June's overall deflation.

The decline in annual inflation and deeper monthly deflation was driven by a decrease in the prices of shallots, tomatoes, and broiler meat. The decline in prices was due to increased supply due to the harvest season and a decrease in the price of chicken feed, which led to a decline in the price of broiler chicken.

In the future, in addition to the pressure of imported inflation due to the weakening of the rupiah and the anticipation of the impact of the La Nina season, the biggest inflationary pressure in July 2024 is expected to come from the seasonal increase in spending on education due to the start of the new school year.

Furthermore, Riefky said that the price components regulated by the government recorded an annual inflation of 1.68 percent (yoy) in June 2024, an increase from 1.52 percent (yoy) in May 2024.

The main contributor to price inflation regulated by the government is the engine kretek cigarettes, because manufacturers charge higher excise on tobacco products to consumers and increased aircraft ticket prices during increased mobility during the Eid al-Adha period.

Core inflation in June 2024 was reported at 1.90 percent (yoy), slightly down from 1.93 percent (yoy) in May 2024, marking the end of the upward trend observed since February 2024.

Core inflation remains under control, due to stable inflation expectations during the Eid al-Adha holiday. The main contributor to core inflation in June is gold jewelry and powder coffee prices.

Gold prices have seen a significant rise this year as investors turn to safe haven assets, driven by expectations surrounding the Fed's potential drop in interest rates, geopolitical uncertainty, and gold purchases by most central banks.

Meanwhile, the price of powdered coffee has increased due to a decline in coffee production, which has been affected by climate change.