Inflation to remain high despite drop in prices

Inflation to remain high despite drop in prices

JAKARTA (JP): The Consumer Price Index fell by 0.21 percent
month-on-month in August, the first deflation since September
last year, the Central Bureau of Statistics (BPS) reported on
Friday.

BPS also said that year-on-year inflation eased to 12.23
percent from 13.04 percent in July, while inflation between
January and August of this year reached 7.48 percent.

The bureau said that the deflation was primarily caused by a
drop in the price of goods and services, especially in
unprocessed food by 2.35 percent and clothing by 2.68 percent.

However, the price of processed food, beverages, cigarettes
and tobacco increased by 0.41 percent; housing increased by 0.89
percent; health care by 0.20 percent; education, recreation and
sports by 4.15 percent; and transport and communications by 0.01
percent.

Senior economist at PT Danareksa Securities Raden Pardede said
that the August deflation was logical as inflation had peaked in
July following earlier increases in the price of fuel and
electricity.

"I think inflation reached a peak in July, now we will see an
easing off of the pressures of the power hikes, and so we can
expect more deflation in the next couple of months," he told The
Jakarta Post.

Raden predicted that the economy would see more deflation in
September and October, but inflation would kick in again in
November and December.

"But inflation in December is seasonal, because during that
month we have religious holidays," he said, referring to the
Muslim holiday, Idul Fitri, which will fall in the same month as
Christmas this year.

However, he said that annual inflation would remain in the
double-digit range, as it was difficult to offset the high
inflation rates that had occurred several months back.

"We are still predicting annual inflation at between 10.5
percent and 11 percent," Raden said.

The current strengthening of the rupiah against the U.S.
dollar was expected to further weaken inflationary pressures.

However, it would not have an immediate effect on the price of
imported goods, Raden said, adding that the effects of the rupiah
would only be felt two or three months ahead.

The government has initially targeted inflation this year to
reach 9.3 percent, but in a recent agreement with the
International Monetary Fund, the inflation target for the year
was set at 9 percent - 11 percent.

Elsewhere, BPS reported exports increased slightly in July by
0.91 percent to US$4.85 billion from $4.80 billion in June,
sending the total for January-July to $34.15 billion.

"This is a 1.72 percent decrease compared with exports during
the same period last year which totaled $34.75 billion," BPS
chief Soedarti Surbakti said.

She said that the slight rise in exports was caused by a 1.6
percent increase in non-oil and gas exports.

Non-oil and gas exports rose to $3.77 billion compared with
$3.71 billion the previous month, but were down 3.61 percent
between January and July this year to $26.09 billion, compared
with last year.

Oil and gas exports on the other hand declined 1.44 percent to
$1.07 billion in July from $1.86 billion in June, due to a
decline in exports of crude oil.

July imports declined by 10.63 percent to $2.48 billion
compared with the previous month.(tnt)