Aang Sunu

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Indonesia Macro Flash

Posted by aangsunu on 4 July 2010

Inflation Surged in June, May Trade Surplus Back Up

June inflation surged above expectations to 5.05% YoY (+0.97% MoM)

June inflation was above consensus/our expectations for a 4.46% YoY increase. Core inflation rose again to 3.97% (May: 3.81%). Much higher headline inflation vs. May’s 4.16% YoY was due to double-digit YoY food price inflation.

Unprocessed Food prices led MoM inflation by far, followed by Processed Food

and Clothing

The biggest contributor to MoM inflation was Unprocessed Food, which rose 3.20% MoM, contributing 0.73ppts to headline MoM inflation. Red chili (0.26ppts) and rice (0.13ppts) were the biggest contributors to food inflation. In the first half of June, rice prices already climbed some Rp400-500/kg (roughly 7%) across various qualities. The next big contributor to inflation was Processed Food, which rose 0.41% MoM and contributed 0.08ppts to monthly inflation. Clothing rose 0.93%MoM, contributing 0.07ppts to inflation on gold jewelry. Other  CPI components (Housing & Utilities, Healthcare, Education, and Transport & Communications) rose modestly in the range of 0.06%-0.23% MoM. Administered Prices were up 2.6% YoY (May: 2.5%) and the volatile component was up 11.51% YoY (May: 7.29%).

BI to maintain rate at 6.5% on Monday; statement likely more cautious on

inflation risks

Given higher-than-expected inflation, coupled with Statistics Board’s warnings that inflation will see its peak during July to September (due to electricity tariff hikes, toll hikes starting 30th June, fasting month, Hari Raya, and start of new school season), we think BI’s tone will become more cautious on inflation risks than before. Despite upside risks to BI’s year-end inflation forecast of 5.3%, we maintain our view  that BI will wait until 2Q 2011 before gradually normalizing rates.

Slower exports, imports vs. expectations; Trade surplus back up

Exports rose 36.0%YoY in May (Apr: 42.4%), slightly lower than consensus and our expectations for a 37.6% and 38.7% increase respectively, contracting 1.2%

MoM SA (Apr: -1.5%). Non-oil & gas exports rose 27.0%  YoY (Apr: 36.5%), contracting 1.5% MoM SA (Apr: -3.4%)  as exports of organic chemicals and electrical machinery fell month-on-month. Meanwhile, oil & gas exports rose 99.7% YoY on the back of a low base,  boosting overall exports. By major destinations, non-oil exports to Europe gained the most at +23.2% MoM NSA; exports to ASEAN declined again by 4.4% MoM NSA. Imports growth slowed to 31.6% YoY (Apr: 67.5%) vs. consensus expectation for 53.9% YoY as capital goods imports halted (0.55% YoY vs Apr: 69.3%). The trade surplus widened back to US$2,467.6mn (Apr: US$799.4mn). With risks to external demand and robust domestic demand supporting higher imports growth, we expect a resumption of gradual narrowing of trade surplus in coming months.

Market impact

We saw bonds sold off 15bps  across the curve, with the front-end already looking soft prior to inflation data. In coming months, we expect a bear-flattening trend to prevail.  

Keterangan : Hasil riset rutin dari Citi yang memberikan informasi dan pandangan dari ahli ekonomi dan keuangan Citi, yakni Johanna Chua.



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