Jakarta. The Central Statistics Agency (BPS) reported a deflation of 0.12 percent in September 2024, marking the fifth monthly deflation this year. Despite the consecutive deflation, Chief Economic Affairs Airlangga Hartarto emphasized that it was driven by effective food price management, not a decline in consumer purchasing power.

Airlangga noted that core inflation, which increased by 2.09 percent year-on-year, was the primary contributor to inflation in September, indicating stable purchasing power. Volatile goods, which saw a 1.43 percent inflation rate, also contributed to overall inflation, but the government's price control teams (TPIP and TPID) played a key role in managing food prices and reducing deflationary pressure.

"Core inflation continues to rise, and if it increases, it means purchasing power is improving," Airlangga said on Tuesday.

"This deflation is not a sign of weakened purchasing power, but rather the result of TPIP and TPID’s efforts, including governors who managed to reduce volatile prices," he added.

Fifth Deflation This Year: Indonesia’s Consumer Prices Fall 0.12 Pct in September

He remains optimistic that inflation in 2024 will stay within the target range of 2.5 percent. Year-on-year inflation stood at 1.84 percent, with calendar-year inflation at 0.74 percent.

Airlangga also noted that consumer confidence remains high. The government will continue to focus on sectors that directly impact household spending.

"We need to sustain purchasing power. Moving forward, we will focus on sectors that cater to the middle class, such as housing and construction materials, which are second in priority after food consumption," Airlangga said.

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Acting Head of BPS, Amalia Adininggar Widyasanti, suggested that more in-depth studies are needed to assess the correlation between deflation and purchasing power. She explained that deflation is driven by lower prices, influenced by market supply mechanisms.

"Prices accepted by consumers have declined due to increased supply, such as harvests, or reduced production costs. It's important to determine whether this trend reflects weakened purchasing power or is simply due to supply-side movements, possibly from government interventions to stabilize stock levels," Amalia said.

Hosianna Evalita Situmorang, an economist at Bank Danamon, attributed the drop in food prices to the harvest season, along with the recent adjustment in non-subsidized fuel prices in September 2024. She also noted that the impact of school fees had subsided after the start of the new academic year in July to September.

"Consumption has been gradually improving since July 2024. We've seen inflationary improvements, particularly in the automotive sector and durable goods," Hosianna concluded.