Indonesia Macro Update - INF 01 Jul 2025
KBVS MACRO UPDATE
Tuesday, 1 July 2025
Jun '25 Inflation Fueled by Eid al-Adha and School Holiday Seasonality
The Inflation in June 2025 was largely driven by seasonal factors, particularly Eid al-Adha and school holidays. This is evident in the primary inflation-contributing components during the month, most notably the increase in air transportation fares, which contributed 0.04 percentage points to overall inflation. As a result, headline inflation in Jun ‘25 stood at 0.19% MoM or 1.87% YoY (Cons: 0.12% MoM or 1.80% YoY; KBVS: -0.35% MoM or 1.33% YoY; Prev: -0.37% MoM or 1.60% YoY).
From a component perspective, the largest contributor to monthly inflation was the Volatile Food Component, which rose by 0.77% MoM or 0.57% YoY. Meanwhile, Core Inflation came in at 0.07% MoM or 2.37% YoY (Cons: 0.12% MoM or 2.42% YoY; KBVS: -0.34% MoM or 1.95% YoY; Prev: 0.07% MoM or 2.40% YoY).
In parallel, the Wholesale Price Index (WPI) in Jun ‘25 registered inflation of 0.12% MoM or 1.36% YoY. The largest increases were seen in the Agriculture, Forestry, and Fishery sector, which posted inflation of 0.49% MoM or 0.94% YoY; followed by the Food, Beverage, and Tobacco Products; and the Textiles, Apparel, and Leather Goods sector, which recorded 0.22% MoM or 1.38% YoY.
Looking ahead, the appreciation of the Rupiah and the continued decline in global commodity prices — including energy and agricultural goods — are expected to alleviate imported inflationary pressures in the coming months. However, at the same time, the start of the new academic year may lead to rising education costs, which could contribute to inflation through the Education component. On the downside, there is continued concern about the weakening performance of the manufacturing sector, with the Manufacturing PMI remaining in contraction for three consecutive months.
Regards,
KBVS Research Team