Prices fall slightly in February: BPS

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.