Prices fall slightly in February: BPS

Urip Hudiono, The Jakarta Post, Jakarta

Consumers in the country anticipating a price rise because of Tuesday's fuel price hike may be interested to know that the prices of goods fell slightly last month.

The Central Statistics Agency (BPS) reported on Tuesday commodity prices experienced a deflation of 0.17 percent in February.

Analysts had expected that prices would have risen in the last month in anticipation of government's plan to cut subsidies to fuel.

The large amount of overseas aid caused deflation of 1.29 percent in Banda Aceh, after the capital of the tsunami-stricken province a experienced a 7.32 percent rise in early January.

BPS chief Choiril Maksum said February's deflation was largely attributable to a decline of about 1 percent in basic food prices.

"The deflation was also caused by a decrease in education costs," he said.

Prices of basic foods fell 1.46 percent last month, outweighing the price rises of other basic goods, such as processed food by 0.37 percent, clothing by 0.04 percent, and housing costs by 0.38 percent.

The cost of education, meanwhile, decreased by 0.02 percent, although costs of health services rose by 0.18 percent and transportation by 0.10 percent.

With February's deflation and January's 1.43 percent inflation, the inflation now stands at 1.26 percent.

February's on-year inflation, meanwhile, stands at 7.15 percent, exceeding 2004's February 4.60 percent. The government is targeting a full-year rate of between 6.5 percent and 7 percent for 2005.

Despite the good news, BPS warned consumers of a possible rise in prices this month following the fuel subsidy cuts.

"Our survey says that the rise in Premium-type gasoline will directly raise inflation by 0.4017 percent, while diesel fuel will increase by 0.0223 percent."

Premium gasoline was hiked 32 percent from Rp 1,810 to Rp 2,400, while diesel fuel by 27 percent from Rp 1650 to Rp 2,100.

"We have also calculated that if transportation fares, electricity and telephone rates also rise due to the fuel price increases, then inflation will further be affected," he said.

A pick up in inflation will lead to decreased purchasing power and further stagnate the country's already less-than-robust economic growth as domestic consumption makes up some 70 percent of GDP. It will also encourage the central bank to increase its benchmark one-month (SBI) interest rate.