Inflation rose to a 19-month high in April, but the Indonesia Stock Exchange composite index put on gains on strong first quarter reports, with the market largely ignoring the inflation figures.

The Central Statistics Agency (BPS) announced Friday that year-on-year inflation rose in April to 8.96%, up from the March figure of 8.17%, with a monthly rise during April of 0.57%.

Raw food produced the strongest gain at 15.73%, with clothing next at 11.29% for the month, Reuters reported. Virtually all sectors saw rises, apart from transportation, which fell by 0.01%.

Higher kerosene prices were also a major factor in fueling inflation, BPS said.

“Inflation will remain high in the next three months, judging from the low inflation in the same period last year,” BPS chairman Rusman Heriawan said.

Analysts doubt the spike will prompt the central bank to raise interest rates next week, although rises are expected later in the year.

Finance Minister Sri Mulyani Indrawati said that if present international oil price trends continued the government expected to raise fuel prices by about 30% and introduce a smart card system to limit fuel purchases to 60 liters per month per vehicle.

Indrawati told the Financial Times the cabinet would decide the size and timing of any fuel price rise "soon" but that the government was receptive to a recommendation from the Indonesian chamber of commerce that society could not handle more than a 30% rise.

The minister predicted that the government would save about Rp25 trillion with a 30% price rise and rationing, of which about 45% would be spent on direct cash transfers to 19.1 million of the poorest families.

President Susilo Bambang Yudhoyono, in a televised speech on Wednesday night, said rising global energy prices posed a serious challenge to the economy.

"I'd like to be honest and frank that the problem we are facing is not light," Dr. Yudhoyono said. "Problems relating to our economy are serious."

A range of first quarter reports from private sector companies made it clear, however, that those problems had yet to strike home in the wider economy.

PT Astra International reported net profit for the quarter 76% up on the same period of last year, buoyed by a 46% rise in April car sales, Unilever reported a rise of 31%, PT Indofood Sukses Makmur reported net profit more than double last year’s figures, and plantation firm PT Bakrie Sumatera Plantation saw net profit shoot up by 793.4%.

The trade surplus rose more than expected to $3.99 billion in March from $2.71 billion a month earlier on rising global commodity prices.

The Indonesia Stock Exchange composite index closed 1.7% higher on Friday on strong first-quarter earnings, with investors ignoring the April inflation data released earlier in the day, Agence France-Presse reported dealers as stating.

The index closed at 2,342.76, a gain of 4.6% for the week. The rupiah was trading at 9,230/9,235 to the US dollar.

Indicators:

Source: Central Statistics Agency

* Bank Indonesia estimate

Compiled by: Mahendra Siregar and Hari S. Noegroho