16th straight month of surplus
Statistics Indonesia reported a significant trade surplus at USD4.74 bn in Aug-21. The surplus was much higher than our estimate and consensus of USD2.65 bn and USD2.32 bn, respectively. The higher trade surplus was due to the rocketing export value to USD21.4 bn where it increased by 20.9% MoM (+44.4% YoY). Commodity prices surge still played significant role as well as the low-base effect due to the impact of the pandemic last year on the trade performance. No one anticipates the significant jump on the export as the level-based mobility restriction (PPKM) remains. The jump on trade surplus will likely support the exchange rate and may help to narrow the current account deficit in 3Q21.
Jump on commodity prices
Lot of important commodities showed higher prices on monthly and yearly basis such as ICP, coal and CPO where they increased by 62.8% YoY, 11.1% YoY and 6.88% YoY respectively. All of sector (OG, agriculture, manufacture and mining) increased on monthly basis with the biggest contributor of growth was mining and other sector at 27.26% MoM (162.9% YoY). On the selected non-OG sector, the biggest contributor (15.4% of total export) came from Animal and Vegetable Fats (HS 15) where it increased by 61.6% MoM to USD4.05 bn. From the selected top export commodities, the second highest growth came from Tin (HS 80) at 56.3% MoM to USD294.3 mn.
Still-weak domestic manufacturer
IHS Markit Indonesia Manufacturing Purchasing Managers’ Index (PMI) increased from 40.1 in Jul-21 to 43.7 in Aug-21. The index moved below the 50-threshold, signifying the contraction. The underperforming manufacturing sector was due to the fall of output and new orders. Purchasing activity fell in line with new orders for a 2nd straight month, though at a slower pace compared to Jul-21. Besides, pre-production inventories for manufacturers declined for the 4th month in a row. Delivery also faced delays due to the mobility restrictions. Manufacturing sector is significant as the import of raw material/intermediary goods was 75.6% of total import. All of imported goods based on the usage increased: consumption goods (16.3% MoM), intermediary goods (8.39% MoM) and capital goods (16.4% MoM). From the selected non-OG sector, the biggest contributor (14.6% of total import) came from Machinery (HS 84) where it increased by 16.9% MoM (32.2% YoY) to USD2.19 bn. Precious Metals (HS 71) recorded the highest growth from the top selected imports at 98.3% MoM (2.71% YoY) to USD227.5 mn during the pandemic.
Expecting unchanged policy rate
Should commodity prices remain high in the coming months, exports could sustain the solid expansion to help keep the trade surplus high. Global trade performance also supported Indonesia trade performance reflected by the Baltic Dry index (BDI) that has been increasing consistently since Jul-21. It gives hope that the international trade will be more robust ahead for Sep-21 data reading. However, amid the thick trade surplus, we see that Bank Indonesia (BI) will hold the BI-7DRRR at 3.5% in the next BoG Meeting in Sep, 20th – 21th 2021 in order to stay competitive yet accommodative towards the market.