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Good morning,
Inflation
Continues to Accelerate in November
The headline inflation edged up
to 3.6% YoY in November, from +3.3% in October (+3.1% in September). This was
partly due to the faster increase in the prices of raw food products and
clothing. Further out, we expect inflation to pick up slightly to 3.8% in
2017, from +3.6% estimated for 2016, on:
i. A
planned electricity tariff hike
ii. A modest
pick-up in volatile food prices.
¨ Despite higher inflationary pressure, it will likely be
manageable and provide room for Bank Indonesia (BI) to maintain its loose
monetary and macro prudential policy. Also, we are of the view that the BI
will likely be more cautious and mindful of volatility in the external
financial market and its impact on the rupiah in deciding its next monetary
policy move, after Trump won US election. Indeed, the BI maintained its
benchmark rate unchanged in November’s meeting. For the rest of the year, we
envisage BI to retain its policy rate unchanged at 4.75%. Further out,
however, we expect the BI to slash its key policy rate by another 25 basis
points to 4.5% in 2017 to support economic growth under stable IDR
circumstances.
¨ Separately, we revised up our inflation estimation for this year
from our previous estimate of 3.4% due to higher than expected price hikes in
volatile foods. As a whole, inflation has been on an upward trend after
hitting a low of +2.8% in August. This was despite the Government cut fuel prices
in August by an average of 1.8%. Starting1 October, the gasoline prices was
cut further although the government decided to increase diesel prices.
¨ Meanwhile, the prices of raw food products and clothing picked
up by 8.5% and 3.6% YoY in November, compared with +7.1% and+3.4%
respectively in October. These were, however, mitigated by a slower increase
in the prices of processed food, alcoholic beverage & tobacco and costs
of education, recreation& sports while the costs of housing & utilities,
healthcare and transport stabilised.
¨ The core inflation rate, on the other hand,stabilised
at 3.1% YoY in November, the same paceas in October and compared with +3.2%
in September (See Table 2). This was in part due to steadydomestic demand and
stable inflationary expectation. The administered prices, however, eased to
an increase of 0.1% YoY, from +0.2% in October. For volatile food (fresh
food), the prices increased to 9.1% YoY in November, in line with a pick-up
in raw food products due to bad weather conditions.
¨ On a monthly basis, the headline inflation increased to 0.5% MoM
in November, after registering +0.1% in October and +0.2% in September. A
rebound in the prices of raw food and a pick-up in the costs of transport
outweighed a slower increase in the costs of housing & utilities. The
former was due to higher chili prices, contributing almost half of monthly
inflation. Likewise, core inflation edged up a tad higher due to weaker
currency. (Rizki Fajar)
Link to report: to be sent out later
Link to Daily report: Indonesia Morning Cuppa - 021216
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Media
Highlights:
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Politics
Jakarta to brace for another demonstration
today
Industries
Indonesia suspends OPEC membership to avoid
production cut
Indonesia PMI increased by 2% MoM to 49.7
Corporates
Ace Hardware targets 7% growth in 2017
Lippo to open new mall in Bogor
Modernland aims 70ha industrial land sales
Pembangunan Perumahan allocates IDR26trn
capex for FY17
Surya Semesta recorded a decrease of 75%
YoY in net profit
Waskita received IDR4.7trn syndicated loan
for Pejagan-Pemalang toll road
Jasa Marga to work on Kediri-Kertosono toll
road
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Our
Recent Publication:
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Economic Highlights: Money Supply and Loan
Growth Finally Bounce Back in October
Link to report: Money Supply, Loan Growth Bounce Back in October
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Sector Update:
Regional Oil & Gas: OPEC Meeting: Christmas Comes Early
Link
to report: OPEC
Meeting: Christmas Comes Early
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Strategy: Indonesia Strategy: Indonesia Strategy:
Managing Volatility
Link to report: REG_Monthly_20161129
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Company Update: Adhi Karya Persero : The Train is Not Here Yet
Link to report: Adhi
Karya Persero : The Train is Not Here Yet
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Company Update: Bank Tabungan Pensiunan Nasional : Profitable
Bank With Appealing Valuation
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Sector Update:
Banks: New PRR Means More Flexibility For Banks
Link
to report: New
PRR Means More Flexibility For Banks
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Company Update: United Tractors : Weakening
IDR And Coal Price Recovery Play
Link to report: United
Tractors : Weakening IDR And Coal Price Recovery Play
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Sector Update:
Property: Stay The Course
Link
to report: Stay
The Course
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Non Rated Note: Ultrajaya Milk Industry
& Trading Co : Key Beneficiary Of Growing Milk Consumption
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Company Update: Indocement Tunggal
Prakarsa: May Face Headwinds From Higher Coal Prices
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Best regards,
Helmy Kristanto
Director
Head of Indonesia
Research
PT. RHB Securities Indonesia
