Inflation dropped again to minus 1.05 percent in July
JAKARTA (JP): Inflation in July dropped to minus 1.05 percent, the fifth deflation five months in a row, according to the Central Bureau of Statistics (BPS).
BPS chief Sugito Suwito said on Monday on a year-on-year basis inflation fell to 13.49 percent in July from 24.5 percent in June.
"Prices of various food materials including rice, red pepper, red onions, vegetables and spices dropped compared to the level in June," he told a press conference.
"The data announced by BPS is completely objective without any engineering or intention to please certain parties," he asserted.
BPS reported that prices of food commodities dropped 3.46 percent in July from June, particularly prices of spices, which fell by 17.04 percent, and rice, which declined by 0.22 percent.
Prices of processed foods, beverages, cigarettes and tobacco declined by 0.13 percent, it said.
BPS also said that the price of clothing fell by 1.59 percent, and prices of telecommunications and transportation services were down by 0.17 percent.
It said that product prices in the housing subsector increased by 0.44 percent, while the education and sport subsector rose by 0.5 percent and the health subsector by 0.58 percent.
Sugito said that inflation for the first seven months in 1999 was 1.66 percent, while inflation for the first four months in the current fiscal year ending March 2000 was minus 2.33 percent.
Indonesia suffered hyperinflation of more than 77 percent last year when the economic crisis heightened.
The government expects inflation this year to fall below six percent.
Analysts earlier expected that inflation in July would be negative again but the figure released by BPS was still surprising.
"This is surprising," said Budi Hikmat, an economist at PT Bahana Securities.
He said that in addition to favorable seasonal factors which increased the supply of food commodities, prices were generally down also because of a weaker purchasing power.
"This can be seen by a drop from August 1998 to July in M1 money supply in July by 22.3 percent," he said, adding that M1 is an indicator of purchasing power.
Budi also said that deflation for five months in a row was an indication of a weakening economy.
"The government has to be brave and say that the economy is weakening," he said.
Budi said that the weakening in purchasing power and economic growth was primarily because the banking sector had yet to resume lending to the real sector.
BPS also reported that trade surplus in June declined to US$1.65 billion from $2.09 billion in May as both exports and imports fell.
BPS said that exports in June dropped by 12.24 percent to $3.60 billion from $4.06 billion in May.
Sugito attributed the decline in exports to an inconsistency in government export policies, a weak real sector and the economic condition in Japan, the country's primary export market.
BPS said that exports in the first semester of this year fell by 11.81 percent to $24.57 billion from $21.69 billion in the same period in 1998.
"The decline is particularly caused by a drop in non-oil and gas exports," BPS said.
BPS said that non-oil and gas exports in June was $3.01 billion, a 10.70 percent fall from the level in May, while non- oil and gas exports in the first semester of 1999 fell by 12.63 percent compared to the same period last year.
Imports in June fell by 2.79 percent to $1.91 billion from $1.96 billion in May, due, in particular, to a decline in non-oil and gas imports, BPS said.
"The rupiah's appreciation in the middle of June has not directly affected the import of non-oil and gas products," BPS said.
It reported that imports in the first semester of the year was down by 13.20 percent to $11.55 billion compared to the same period in 1998.
But it said that imports of consumption goods from January to May increased 65.15 percent to $928 million compared to the same period last year.
Imports of raw materials in the same period, however, declined by 9.96 percent, while imports of capital goods dropped by 43.33 percent. (rei)