Decline in Food Commodity Prices Causes Deflation

KOMPAS/JUMARTO YULIANUS

A number of buyers choose purebred chicken eggs which are sold in low-cost market in the Cambodian Field, Central Banjarmasin, Banjarmasin City, South Kalimantan, Thursday (15/9/2022). BPS noted that deflation in October 2022 was driven by the fall in prices in the volatile price group and the food. Food commodities whose prices have fallen include red chilies, broiler eggs, broiled chicken meat and chili pepper.

JAKARTA, KOMPAS — The decline in the prices of a number of food commodities led to deflation in October 2022. Nevertheless, the threat of high inflation remains as the increase in fuel prices has not been fully transmitted to the prices of goods and services in the affected sectors.

Statistics Indonesia (BPS) announced on Tuesday (1/11/2022), based on the development of the consumer price index in October 2022, that there was 0.11 percent deflation compared to the previous month (month-to-month).

The prices of most food commodities in October were relatively under control compared to September 2022, which recorded a monthly inflation of 1.17 percent.

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Thus, on an annual basis, inflation as of October was at 5.71 percent, slightly lower than the previous month at 5.95 percent.

BPS noted that deflation in October 2022 was driven by the fall in prices in the volatile price group and the food, beverage and tobacco expenditure group.

Food commodities whose prices have fallen include red chilies, broiler eggs, broiled chicken meat and chili pepper.

“The deflation in food commodities caused the inflation rate to be more restrained in October," said deputy for Distribution Statistics and Services at BPS Setianto on Tuesday.

KOMPAS/BAHANA PATRIA GUPTA

A farmer plows a field with a mini tractor in Buduran District, Sidoarjo Regency, East Java, Monday (5/9/2022). The increase in subsidized fuel prices makes the production cost of cultivating agricultural land rise.

Transportation

In the transportation sector, there was an inflation of 0.35 percent on a monthly basis mainly due to the increase in the price of gasoline and transportation fares within the city.

Setianto said that inflationary pressures in the transportation category followed the increase in fuel prices on Sept. 3, 2022. Two months after fuel prices rose, several regions began to increase transportation fares within the city, pushing up transportation costs.

Setianto said in a number of regions, the fares of public transportation had not increased thanks to the subsidies by the regional governments. This also kept inflation in October 2022 in check.

He estimated that in the future, the effect of rising fuel prices would continue. The executive director of the Center of Reform on Economics Indonesia, Mohammad Faisal, assessed that, although inflation was under control, there were several things that needed to be anticipated.

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One of them is delayed inflation as the increase in fuel prices has not been fully transmitted in the form of increased transportation costs.

In addition, the increase in inflation, which is still mostly restrained at the producer level, also needs to be watched. At one point, inflation could soar again if producers decide to pass on inflation at the production level and increase the price of goods in the market.

Bank Mandiri economist, Faisal Rachman, estimated that inflation would remain high at 5-6 percent until semester I-2023 at 5-6 percent.

The executive director of the Communications Department of Bank Indonesia, Erwin Haryono, said that for the whole of 2022, the central bank estimated inflation would be lower than the initial estimate, although it would be still above the 2-4 percent target.

This article was translated by Hendarsyah Tarmizi.