Indonesia Macro Update - INF 04 Dec 2023
KBVS MACRO UPDATE
Monday, 4 December 2023
El Niño Continues to Drive Nov '23 Inflation
As anticipated, the El Niño-related risks have constrained domestic production and propelled a rise in Volatile Foods price by +1.72% MoM or +7.59% YoY, contributing significantly by 44.05% to the increase in the CPI headline inflation for Nov '23, reaching +0.38% MoM or +2.86% YoY (Cons: +2.70% YoY, KBVS: +2.65% YoY, Prev: +2.56% YoY). Meanwhile, Indonesia's Nikkei Manufacturing PMI for Nov '23 stood at 51.7 (Prev: 51.5), continuing its trend within the expansionary zone for 27 consecutive months.
Looking ahead, we anticipate that the conclusion of the dry season by the end of Oct '23, coupled with the commencement of the planting season, will gradually bolster production and mitigate commodity prices hike (especially Volatile Foods). This is evidenced by the stabilization of these components since the third week of Nov '23, alongside price reductions seen in Rice, Chicken, and Beef in the final week of Nov '23 (see Table 1, P2). Nonetheless, we acknowledge the potential effects of the seasonal impact of school holidays, Christmas, and New Year, which could drive population mobility and stimulate domestic demand. This, in turn, is expected to contribute to an increase in Manufacturing PMI for Dec '23 and potentially drive inflation in related sectors. Nevertheless, with the reduction in Non-Subsidized Fuel prices as of 1 Dec '23, ranging from -8.26% (Dexlite) to -8.73% (Pertamina Dex) and a stabilizing Rupiah within the range of IDR15400 to 15600 per USD, we anticipate that inflation by the end of 2023 will hover around 0.5% MoM or 2.7% YoY.
Regards,
Fikri C Permana - KBVS Research Team