Indonesia's consumer index slips amid caution

JAKARTA: Consumer confidence has weakened amid deteriorating public perceptions of current economic conditions, while retail sales are also expected to see slower growth, according to a monthly survey by Bank Indonesia (BI).

The survey published last Thursday showed consumer confidence index dipped slightly to 118.1 in September from a reading of 118.5 the previous month, but remains well above the 100-point mark that separates public optimism from pessimism.

“BI’s consumer survey in September indicates that consumer confidence in economic conditions remains strong,” BI spokesperson Ramdan Denny Prakoso said in a statement accompanying the survey.

Ramdan said consumers’ general optimism had been maintained in September, supported by a rise in the economic expectations sub-index to 128.7, from 127.6 in August.

While consumers’ overall expectations for economic conditions over the next six months have continued to rise, their expectations for business activity have declined to 121.5 from 122.1 over the same period.

This was particularly pronounced among individuals earning an income between 3.1 million rupiah (US$173) and four million rupiah, whose index dropped sharply to 113.8, from 122.6 in August.

Meanwhile, the current economic conditions sub-index fell to 107.5 from 109.4 amid decreased optimism regarding current incomes and job availability.

Respondents’ current income assessments worsened, especially among households earning one million rupiah to two million rupiah, whose index slid into pessimistic territory at 99.9.

Consumers in this income bracket also remain pessimistic about buying durable goods such as motorcycles or washing machines, although the index rose to 94.7 from 89.9.

Growing caution over durable goods purchases is notable among consumers earning between 2.1 million rupiah and three million rupiah, and those earning 3.1 million rupiah to four million rupiah.

The retail sales index (RSI) is meanwhile projected to contract 2.3% to 221.3 points in September from 226.5 in August, according to preliminary BI data published last Friday.

The central bank attributed the weak reading to declining sales in the food, beverage and tobacco categories.

September’s RSI, however, marked a 1.4% annual increase following a 1.3% year-on-year (y-o-y) rise the preceding month, supported by retailers’ expectations of increasing sales in categories such as other goods, household equipment and cultural and recreational goods.

The retailers surveyed also expected sales to rise in November but then decrease in February 2027 on anticipation of higher inflationary pressure.

The BI survey noted that Indonesian consumers are in a “significantly stronger position than before the pandemic”, highlighting substantial expansion in household consumption in recent years.

Fitch Solutions’ BMI Research projected that consumers in Indonesia would remain cautiously optimistic over the course of 2026 and 2027.

Despite a modest increase to 5.5% y-o-y in real household spending this year, growth was expected to slow to 4.9% y-o-y in 2027.

BMI forecast that the United States-Iran conflict would be resolved in the first quarter of 2027, with global pressure expected to influence fuel prices, inflation and interest rates.

The central bank is expected to take a more hawkish stance, which will further impact household spending and consumer confidence. — The Jakarta Post/ANN