US Inflation Declines, Regional Banking Stability Still in Focus

The United States stock market, the S&P 500, closed down -0.29% throughout last week's trading. Last week US inflation data for April was released and showed an overall decline. CPI in April was at 4.9% compared to the previous year, a slight decrease compared to 5% in March. This strengthens market players' belief that the Fed will end interest rate increases. According to the CME FedWatch Tool, there is an 85% chance that the Fed will keep interest rates unchanged at its next meeting in June.

In addition to inflation data, the Senior Loan Officer Opinion Survey (SLOOS) reported tighter credit and weaker business loan demand in the first quarter for commercial and industrial loans as well as commercial property loans. Concerns about the stability of the regional banking sector continued throughout the week, with PacWest Bancorp (PACW) coming into the spotlight. The bank's stock plummeted during the extended trading session on Thursday after pledging to increase collateral to borrow more through the Fed's discount window, a move made after revealing that the bank had lost 9.5% of its total deposits last week.

Indonesia's GDP Grows 5.03% in the First Quarter

The Central Statistics Agency (BPS) reported Indonesia's GDP (Gross Domestic Product) growth for the first quarter of 2023 at 5.03%. This level is higher than GDP growth in the fourth quarter of 2022 of 5.01%. This growth was supported by the recovery of people's mobility due to the end of the pandemic which encouraged consumption growth, as well as investment and exports which are still growing positively. In addition, Minister of Finance Sri Mulyani expressed her belief that the Indonesian economy will grow by 4.5 – 5.3% in 2023, supported by various factors. He stated that export performance will likely remain high, private consumption will increase, and government spending will grow positively. Additionally, non-construction investment looks good due to downstream industries currently run by the government.

BI: Consumer Loan Growth Slows in 1Q23

According to Bank Indonesia's report, consumer loan growth slowed across all sectors in the first quarter of 2023 compared to the fourth quarter of 2022. Meanwhile, in terms of commercial loans, the fisheries sector recorded the highest growth in new loans. BI projects, based on the Bank Indonesia Business Survey (SKDU), that there should be an increase in financing demand in the second quarter of 2023, as market expectations anticipate increased business activity. Working capital loans will be the driver of growth, followed by investment loans and consumer loans. As for consumer loans, the order of growth rates is expected to be home and apartment loans, multipurpose loans, and vehicle loans. Policies for home and apartment loans are expected to become looser in the second quarter of 2023.

Key Takeaways:

The US stock market, represented by the S&P 500, closed down by -0.29% throughout last week's trading. US inflation in April was reported at 4.9%, lower than the 5% in the previous month. Additionally, the Senior Loan Officer Opinion Survey (SLOOS) reported tighter credit and weaker business loan demand in the first quarter. Market concerns about the stability of the regional banking sector continued throughout the week.

For the domestic economy, the Central Statistics Agency (BPS) reported Indonesia's GDP (Gross Domestic Product) growth for the first quarter of 2023 at 5.03%. This level is higher than GDP growth in the fourth quarter of 2022 of 5.01%. Minister of Finance Sri Mulyani expressed her confidence that the Indonesian economy will grow by 4.5 – 5.3% in 2023. In other economic news, based on a Bank Indonesia report, consumer loan growth slowed in all sectors in the first quarter of 2023 compared to the fourth quarter 2022. However, BI projects that based on the Bank Indonesia Business Survey (SKDU), in the second quarter of this year there should be an increase in demand for financing, because market expectations expect business activity to increase.

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