The Central Statistics Agency (BPS) released a fresh suite of macroeconomic data on Monday, August 3rd, 2026, painting a nuanced picture of Indonesia’s economic trajectory. While consumer price index (CPI) inflation eased significantly in July, the nation’s trade balance continued its deficit streak in June, albeit with a narrower gap. Separately, the manufacturing sector showed promising signs of revival, injecting a dose of optimism into the outlook.

Inflationary Pressures Ease: July 2026 CPI Data Unveiled

Indonesia’s battle against rising prices saw a notable victory in July 2026, as headline inflation decelerated, surprising market expectations. This slowdown provides much-needed breathing room for consumers and policymakers alike.

Headline Inflation Decelerates Below Expectations

The CPI inflation rate for July 2026 cooled to 2.88% Year-on-Year (YoY), a significant drop from June’s 3.34% YoY. This figure landed comfortably below the consensus forecast of 3.2% YoY, signaling a more rapid disinflationary trend than anticipated.

On a monthly basis, Indonesia actually recorded a deflation of 0.14% Month-on-Month (MoM), a stark contrast to June’s 0.44% MoM inflation and defying the consensus expectation of 0.09% MoM inflation. This monthly deflation was primarily driven by two key expenditure groups:

• The ‘food, beverages, and tobacco’ category contributed a substantial 0.26 percentage point to the deflation. This was primarily attributed to increased horticultural commodity production and a noticeable reduction in demand, particularly during the pause of the Free Nutritious Meals (MBG) program over the school holidays.
• ‘Personal care and other services’ also played a role, contributing 0.06 percentage point, largely due to declining prices for gold jewelry.

Core Inflation Holds Steady

Amidst the volatility of headline figures, core inflation remained a pillar of stability, holding firm at 2.76% YoY in July 2026, unchanged from its June reading. This consistency suggests underlying price stability, insulated from more transient factors.

Trade Balance Navigates Choppy Waters: Deficit Narrows

Indonesia’s trade balance continued its challenging run in June 2026, recording another deficit. However, the silver lining emerged as the shortfall significantly narrowed, signaling potential adjustments in global trade dynamics and domestic demand.

June 2026 Sees Reduced Trade Deficit

The nation’s trade balance swung back into deficit in June 2026, yet the figure was a more manageable US$450 million. This represents a substantial improvement from May 2026’s deficit of US$1.61 billion and was better than the consensus expectation of a US$780 million deficit, indicating some resilience in the face of headwinds.

Exports Rebound, Imports Remain Robust

On the export front, a positive shift was observed as shipments expanded by +8.84% YoY in June 2026, a stark reversal from May’s -5.73% YoY contraction. This rebound was predominantly propelled by recovering thermal coal imports from various Asian nations, as global energy demands showed signs of strengthening. For more details on this trend, see the thermal coal import analysis.

However, the import ledger remained robust, surging by a substantial +34.27% YoY in June 2026, primarily driven by persistently high oil and gas imports. This continued strong import appetite highlights ongoing domestic consumption and industrial activity, alongside fluctuating energy prices.

Half-Year Trade Surplus Shrinks Significantly

Looking at the broader horizon, Indonesia’s trade surplus for the first half of 2026 (1H26) experienced a sharp contraction, plummeting to just US$3.58 billion. This stands in stark contrast to the robust US$19.48 billion surplus recorded in 1H25. The significant reduction stemmed from imports surging by +18.69% YoY, while exports managed a more modest growth of only +4.13% YoY. This imbalance underscores the challenges in maintaining a strong trade surplus amidst evolving global and domestic economic conditions.

Manufacturing Sector Awakens: S&P Global PMI Points to Growth

In a separate and encouraging development, the manufacturing sector, a crucial engine of Indonesia’s economy, showed definitive signs of recovery. The latest Purchasing Managers’ Index (PMI) data signals a potential turning point for industrial activity.

PMI Hits Eight-Month High, Signaling Expansion

According to S&P Global, Indonesia’s Purchasing Managers’ Index (PMI) for manufacturing climbed to 50.2 in July 2026, a notable jump from June 2026’s 46.9. This marks the highest level since February 2026 and, more significantly, represents the first expansion in factory activity (a reading above 50) since March 2026. This reversal ends a four-month streak of contraction, with production now demonstrating marginal growth.

Despite this overall positive shift, a cautionary note remains on the export front: export sales continued to weaken for the fifth consecutive month, suggesting that global demand for Indonesian manufactured goods still faces hurdles.

Costs and Sentiment Dynamics

While input cost inflation eased to a four-month low, the underlying pressure remains high, compelling producers to raise their selling prices. This cost-push factor could temper future demand if not managed effectively.

However, the broader sentiment within the business community reached its highest point since January 2026. This resurgence in optimism is fueled by a confluence of factors: stronger sales expectations, improved customer sentiment, and a perception of lower future cost pressures. These combined elements suggest a more confident outlook among manufacturers, potentially paving the way for sustained growth in the coming months.