In­done­sian in­fla­tion ac­cel­er­ates on food prices

The China Post - - WORLD BUSINESS -

In­done­sia’s in­fla­tion ac­cel­er­ated in May to its high­est level in five months due to in­creased food prices, data showed Mon­day, as peo­ple stocked up be­fore the Is­lamic holy month of Ra­madan.

The con­sumer price in­dex rose 7.15 per­cent year- on- year, ac­cord­ing to the of­fi­cial statis­tics agency, faster than ex­pected and up from a 6.79 per­cent in­crease in April. It was the high­est level since 8.36 per­cent in De­cem­ber.

In­fla­tion in Southeast Asia’s big­gest econ­omy has been edg­ing up in re­cent months due mainly to higher fuel costs, af­ter the gov- ern­ment at the start of the year al­most to­tally abol­ished huge sub­si­dies and let petrol prices float with the mar­ket.

In May, how­ever, the main driver was the higher cost of sta­ples such as chicken and chili as peo­ple stocked up ahead of the fast­ing month of Ra­madan, which starts in mid-June.

Food prices typ­i­cally rise be­fore Ra­madan as peo­ple in the world’s most pop­u­lous Mus­lim­ma­jor­ity coun­try buy more food to give away to the less for­tu­nate dur­ing Is­lam’s holi­est month, and for elab­o­rate fast- break­ing meals.

Higher elec­tric­ity caused in­fla­tion to prices also ac­cel­er­ate, said statis­tics agency chief Suryamin, who like many In­done­sians goes by one name.

The ac­cel­er­at­ing in­fla­tion presents a dilemma for Bank In­done­sia, the cen­tral bank. Some econ­o­mists are call­ing for pol­i­cy­mak­ers to cut the main rate from 7.50 per­cent to boost slow­ing growth, but ris­ing in­fla­tion lim­its their room for ma­neu­ver.

HSBC’s pur­chas­ing man­agers in­dex for In­done­sia mean­while painted a gloomy pic­ture of the man­u­fac­tur­ing sec­tor. It rose slightly to 47.1 in May from 46.7 in April but was still be­low 50, in­di­cat­ing a con­trac­tion.

A read­ing above 50 sig­nals an ex­pan­sion.

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