Indonesia grew 5.5% even as oil got dearer. Here's how

What happened

Indonesia's economy grew 5.47% in July–September from a year earlier, Statistics Indonesia (BPS) said on 5 November. Economists had expected 5.2%, and growth in the second quarter was 5.29%. Over the first nine months of the year the economy grew 5.45%.

What held it up

GDP can be added up from what is spent: by households, by firms on investment, by the government, and by foreigners on exports, minus what is spent on imports. Our growth mechanic explains the sum. In the third quarter:

• Households, more than half of the economy, spent 5.04% more than a year earlier, about the same pace as in the second quarter (5.06%).
• Investment grew 6.06%, down from 6.87%, and government spending 8.95%, down from 15.97%.
• Exports rose 4.59%, a little faster than in the second quarter. Imports rose 7.31%, slower than the 9.34% before.

Why trade stopped being a drag

Indonesia imports more oil than it exports. When the war involving Iran pushed up oil prices from March, its import bill jumped and it ran a trade deficit earlier this year. Because imports are subtracted in the GDP sum, net trade, exports minus imports, took about a full percentage point off growth in each of the first two quarters. In the third quarter it took off only 0.28 points, as imports slowed. BPS said Indonesia's main trading partners, including China, the US, Malaysia, Singapore, Vietnam and South Korea, were still growing.

That is the usual path of an oil shock for an importer: the first hit comes through the import bill; what matters next is whether households keep spending. So far in Indonesia they have.

Where it sits in the chain

This is Link 5, the real economy: higher energy costs pass through trade first, and growth holds up only as long as domestic demand does.

What to watch

• Bank Indonesia's next policy decision and the rupiah.
• Indonesia's trade balance for October, due in mid-November.
• Oil prices: Brent traded below $95 on 9 November on hopes of US–Iran talks.