Indonesia Macro Update - INF 03 Jun 2025
KBVS MACRO UPDATE
Tuesday, 3 June 2025
May '25 Inflation Eases Amid Concurrent Harvests and Moderation in Transport Prices
Inflation in May 2025 showed further moderation driven by concurrent harvest in some regions on some volatile foods commodities. This was reflected in headline monthly deflation of –0.37% MoM (Prev: 1.17% MoM, Cons: –0.01% MoM), while annual inflation eased to 1.60% YoY (Prev: 1.95% YoY, Cons: 1.94% YoY).
From the expenditure group perspective, the largest deflation occurred in the food, beverages, and tobacco category, which declined by 1.4% MoM and contributed 0.41% to overall monthly deflation. Meanwhile, the highest inflation was recorded in the information, communication, and financial services category, particularly in the sub-category of information and communication services, which rose by 0.31% MoM.
Looking ahead, we expect decline in the BI rates will increase consumer spending and thus increase the deflation upward again. As is well known, the BI rate was lowered to stimulate the economy and keep inflation within BI's inflation target of 2.5+-1%. In addition, the new civil servant salary bonus that was distributed in early June is also expected to boost household spending.
Regards,
KBVS Research Team