Interest rate hike slows down soon, S&P 500 rises 1.1%

The United States stock market S&P 500 closed green with an increase of 1.13% throughout last week's trading even though the market traded down for 4 days. Last week's increase came from a significant increase last Wednesday of 3.1% in one day. This was caused by comments from Jerome Powell who indicated that the Fed could start slowing down interest rate increases starting from its meeting this December. Meanwhile, on other days the decline was caused by negative sentiment from China regarding its zero-covid policy, as well as protests and demonstrations that occurred in many provinces in China. Overall, over the past week almost all sectors closed in the green, with the highest increases in the Telecommunications sector at 3.3%, Consumer Discretionary at 2.1%, and Health Care at 1.9%. Meanwhile, the Energy sector experienced a decline of -1.9% due to the decline in world oil prices.

Inflation in November was reported at 5.42%

Inflation in November was reported at 5.42%, which is lower than last October which was 5.7%. This decrease in inflation was driven by a decrease in food prices of -0.2% compared to the previous month. Red chili prices experienced the largest decline of -22% compared to the previous month. Meanwhile, the price of garlic decreased -0.9% compared to the previous month. However, food prices are expected to increase again in the near future due to the holiday period and decreased supply of eggs, tofu and tempeh. Analysts expect inflation in 2022 to be lower than previously estimated, at the level of 5.5%. For 2023, inflation in Indonesia is predicted to be above 5% throughout the year.

APBN Deficit 0.91% of GDP, First Time in 2022

The State Revenue and Expenditure Budget (APBN) until the end of October 2022 recorded a deficit. This is the first time this has happened in the 2022 budget year. The APBN is already experiencing a deficit of IDR 169.5 trillion or -0.91 of GDP. However, this deficit is still lower than the government estimates. The reason for the deficit is because of the government's high need to pay for energy subsidies, especially fuel oil. Additionally, state revenues experienced a slowdown from lower income tax growth at 60.3% (versus 64.3% last September). In the future, analysts estimate that state revenues will slowly decline due to the normalization of commodity prices such as coal, CPO and rubber.

Key Takeaways:

The United States stock market index S&P 500 closed higher by 1.1% during last week's trading supported by comments from Jerome Powell who said that the Fed could start slowing down interest rate increases starting from its meeting this December. However, there are still negative catalysts from China regarding its zero-covid policy, as well as protests and demonstrations that have occurred in many provinces in China.

For the domestic economy, inflation in November was reported at 5.7%, driven by a decrease in food prices, especially red chilies, which decreased by -22% compared to the previous month, as well as a decrease in the price of garlic, which was -0.9% compared to the previous month. For expectations in 2022, it is estimated to be at the level of 5.5%, lower than previous expectations.

In other economic news, the State Revenue and Expenditure Budget (APBN) until the end of October 2022 recorded a deficit for the first time in the 2022 budget year. The size of this deficit was -0.91% of GDP. This happens because of the government's high need to pay energy subsidies, especially fuel oil. In addition, state revenues experienced a slowdown from lower income tax growth compared to the previous month. In the future, analysts estimate that state income will slowly decline due to the normalization of commodity prices.

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