In May 2025, the S&P Global US Manufacturing PMI rose to 52 due to stronger domestic demand and inventory buildup amid tariff concerns, while the ISM Manufacturing PMI fell slightly to 48.5, reflecting ongoing contraction. The service sector showed mixed results: the S&P Global Services PMI improved to 53.7 with increased hiring, but the ISM Services PMI dropped to 49.9, signaling contraction influenced by rising costs from tariffs. Overall, tariffs and trade issues continued to pressure both sectors, causing inflation and supply challenges.

Indonesia's Consumer Price Index (CPI) experienced a decrease in inflation to 1.60% YoY in May 2025 from 1.95% YoY in April 2025. The realized inflation was below the consensus forecast of 1.94% YoY. Core inflation also decreased to 2.40% YoY in May 2025 from 2.50% YoY in April 2025. Commodities contributing to decreased core inflation included jewelry, cooking oil, and ground coffee. Meanwhile, the volatile food group experienced deflation of -1.17% YoY in April 2025, primarily driven by price decreases in broiler chicken, shallots, red chilies, tomatoes, and chicken eggs in April 2025. The administered price group experienced inflation of 1.36% YoY, with significant contributions from drinking water tariffs, machine-made kretek cigarettes, and hand-rolled kretek cigarettes.

Indonesia's Trade Balance Surplus (NPI) decreased significantly to US$0.16 billion in April 2025 from US$4.33 billion (Figure 1). This decline was due to a significant decrease in the non-oil and gas surplus, from US$ 6.00 billion in March 2025 to US$ 1.51 billion in April 2025. The main contributors of decreased were animal and vegetable fats and oils, mineral and vegetable fuels, and iron and steel. Meanwhile, the oil and gas trade balance recorded a deficit of US$1.35 billion in April 2025, with crude oil and petroleum products as the main contributors. The NPI surplus has maintained its positive trend for 60 consecutive months since May 2020.

U.S. economic growth contracted by -0.20% QoQ in the second estimate for Q1 2025, down from 2.40% QoQ in Q4 2024, as released by the US Bureau of Economic Analysis, and slightly better than market expectations of -0.3% QoQ contraction. It aligns with the slowdown in general inflation indicators, specifically the Personal Consumption Expenditure (PCE), which decreased to 2.10% year-over-year (YoY) in April 2025 from 2.30% YoY in March 2025. Meanwhile, the unemployment rate in May 2025 is expected by market consensus to remain stable at 4.2%, unchanged for two consecutive months since March 2025 (Figure 1). U.S. GDP growth was driven by personal consumption expenditure, which fell to 0.8% QoQ from 2.7% QoQ in Q4 2024, representing 69.4% of total GDP (Figure 2). Personal consumption value increased by 1.2% QoQ to US$16.3 trillion, supported by increased spending on clothing and footwear. Other expenditures showed domestic investment growing at the highest rate of 24.4%QoQ. At the same time, government spending slowed by 0.7% QoQ due to President Donald Trump's policy of maintaining efficient government operations overseen by the Department of Government Efficiency (DOGE). Net exports showed the highest slowdown at 30.9% QoQ due to rising import values, as goods and services were not produced domestically.

Broad money supply (M2) growth slowed to 5.2% YoY, reaching Rp9,390.0 trillion in April 2025, down from 6.1% YoY in May 2025. By component, M2 growth was driven by narrow money (M1) growth of 6.0% YoY and quasi-money growth of 2.4% YoY in March 2025. M2 growth was supported by M1 growth of 55.6%, consisting of 8.7% MoM growth in currency outside commercial banks and rural banks and 5.9% MoM growth in rupiah demand deposits, including electronic money and rupiah savings that can be withdrawn at any time, in April 2025. Meanwhile, on a monthly basis, M2 experienced a slight decrease of 0.49% MoM (Figure 1), in line with declining inflation in April 2025 following the normalization after the Religious Holiday (HBKN) was Hari Raya Idul Fitri.

Bank Indonesia's Board of Governors Meeting (BGM) has lowered interest rates by 25 bps to 5.5%, with a Deposit Facility Rate of 4.75% and a Lending Facility Rate of 6.25% on May 21, 2025. This decision aligns with controlled inflation targeting 2.5±1% for 2025 and 2026. Additionally, BI focuses on maintaining Rupiah exchange rate stability that is aligned with fundamental values and promoting sustainable economic growth amid global and domestic economic dynamics. Furthermore, BI strengthens the Macroprudential Liquidity Policy (KLM) to enhance credit growth financing in the MSME sector and promote flexibility in banking liquidity management. BI strategy to drive economic growth includes strengthening the rupiah exchange rate strategy through open market operations in Spot markets, Domestic Non-Deliverable Forward (DNDF) in domestic markets, and purchasing Government Bond Securities (SBN) in the secondary market to maintain financial market stability and adequate banking liquidity, strengthening pro-market monetary operations to reinforce interest rate reduction factors, accelerating money market and foreign exchange transactions, and maintaining attractive yields for foreign portfolio investments in domestic financial assets. BI also reduced the Macroprudential Liquidity Buffer (PLM) ratio by 100 bps to 4% from 5% for conventional commercial banks and the sharia PLM ratio by 100 bps to 2.5% from 3.5% for Islamic banks, effective on June 1st, 2025.

Consumer Confidence Index rose slightly to 121.7 in April 2025, driven by improvements in the Economic Condition Index despite a decline in consumer expectations. Income allocation shifted with decreased spending and debt repayment, while savings increased, reflecting normalization after the Eid al-Fitr holiday allowance. This change in consumer behavior contributed to a slowdown in retail sales growth, which contraction to 2.2% YoY, although monthly sales still showed moderate growth. Key sectors supporting sales included spare parts, accessories, and fuel, while communication and information equipment experienced significant declines.

Inflation in the United States rose by 0.2% MoM in April 2025 from 0.1% MoM in March 2025 but below market expectations of 0.3% MoM. This was influenced by a 0.7% MoM increase in the energy index in April, where higher natural gas and electricity indices offset a decline in the gasoline index. Meanwhile, the food index fell to 0.1% MoM in April 2025. Core inflation, which excludes food and energy, rose by 10 basis points to 0.2% MoM in April 2025 from 0.1% MoM in March 2025. This increase was mainly driven by a 0.3% MoM rise in the rent index, which accounts for more than 50% of core inflation, up from 0.1% MoM in March 2025.

Indonesia’s foreign exchange reserves decreased by 2.93% MoM to US$ 152.5 billion in April 2025, down from US$ 157.1 billion in March 2025. This decline was primarily driven by government external debt repayments and currency stabilization measures in response to heightened global financial market uncertainty. Despite the decrease, the current level of reserves remains robust, equivalent to the financing of 6.4 months of imports or 6.2 months of imports, and government external debt payments are well above the international adequacy standard of approximately 3 months of imports.

The Fed has maintained the interest rate at 4.25%-4.50% at the Federal Open Market Committee (FOMC) meeting on May 7, 2025. The Fed Committee assessed that the latest economic indicators continue to show solid expansion in the US economy. The unemployment rate has remained stable at low levels in recent months, and the labor market remains strong, even though inflation data is still relatively high and the value of the trade balance continues to fluctuate.