A big jump in cement sales
The Indonesian economy displayed a slight improvement in Q3 2017, posting a rate of growth of 5.06%, which was modestly better than the 5.01% achieved in Q2 2017. At the same time, the Business Tendency Index also showed increased optimism compared with the previous quarter. One interesting fact from the economy was a jump in cement sales in Q3, which reached growth in volume of 9%. The improvement in cement sales continued to accelerate in October, with sales at a growth rate of 11.4%. Encouraging signs were also reported by the steel industry, which enjoyed higher demand, while steel prices were lifted by higher Chinese steel prices.
The improvement in the economy was mostly driven by better investment expenditure as well as exports, while consumption remained the largest contributor to the economy. The growth of the economy was also supported by improvement in the balance of payments. The Indonesian current account deficit improved slightly in Q3 2017, from 1.91% of GDP in Q2 of 2017 to 1.65% of GDP in Q3. Since the Financial and Capital Account in the balance of payments experienced a huge surplus, the overall balance of payments enjoyed an encouraging result, leading the improvement in the Central Bank's foreign exchange reserves.
At the same time that the Balance of Payments report for Q3 2017 was relatively sanguine, the Central Board of Statistics also reported an encouraging report on the trade balance for October. Exports increased considerably but imports grew faster; the result was a large trade surplus, albeit lower than that of the previous month. In October, imports hit their highest level of the past two years while exports reached $15,087.1 million, marginally higher than the figure for the previous month. However, compared with the same period of the previous year, total exports increased by 18%. Meanwhile, imports in October rose more sharply month over month, by 11.04%, to reach $14,192.1 million. Compared with the same period of 2016, imports grew by 23.33%. This resulted in a trade surplus of $895 million.
The Central Board of Statistics also released the inflation report, which showed relatively mild inflation for the month of October, at 0.01%. With that performance, year-over-year inflation stood at 3.58%, at the lower end of the Central Bank's target corridor. Such benign inflation coupled with the positive external balance results led the Central Bank to keep the benchmark interest rate at 4.25% at its monetary policy meeting in November.
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