Inflation Update – December 2023

– Inflation in December 2023 was recorded at 2.61% y-y / 0.41% m-m, inline with our estimates of 2.56% (Cons: 2.82%). Core inflation follows a continued disinflation trend, reaching a 23-month low at 1.80% y-y. The main contributor to the annual inflation remained unchanged in December.

– Volatile Food inflation eased to 6.73% y-y/1.42% m-m, after reaching a 9-month high in November. Chili prices continued to become the main contributor in the monthly inflation as rice price remained stable. Administered Price inflation decreased to 1.72% y-y (vs Nov’s 2.12%) but exhibited monthly acceleration due to 4.67% m-m increase in airplane tariffs, contributing around 15% to the overall monthly inflation, equivalent to the contribution of red chili.

– The monthly uptick in rice prices showed a diminishing trend, with fewer cities experiencing higher rice prices in December (56) compared to November (58). The surge in airplane ticket prices reflected stronger demand during the 2023 holiday season, as the inflation of recreational related items reached a 5-year high.

– Looking ahead, we anticipate for slight acceleration of inflation in January, mainly driven by the introduction of new excise taxes on cigarettes and e-cigarettes. On the contrary, rice and chili inflation may continue its downward trajectory trend, contributing to the stabilization of overall inflation.

(BRI Danareksa Economic Research)