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ndonesian consumer confidence has seen a steady increase over the last six months. Fuelled by optimism about the future, the Consumer Confidence Index by InsightAsia increased 8 points from 97 to 105, rising above the neutral point of 100.

InsightAsia, one of Asia Pacific's leading market research groups - specializing in quantitative, qualitative research, brand development, business analytics and consultancy - surveys 9,200 people across five Asian countries on a yearly basis to produce The Asian Consumer Confidence Index.

Consumers in Indonesia are very optimistic about the future of both the economy and their financial well-being. This optimism has become stronger since the second quarter. Nevertheless the feeling about the current state of the economy and current financial well-being is somewhat negative; consumers still think that this is a bad time to purchase major household products, although the perception of financial well-being is less negative than earlier in the year.

The GDP growth of 4 percent in the second quarter was the lowest in six years and the government expects a similar number for the third quarter.

Consumers are slightly negative about the current state of the economy. The perception of current financial well-being has improved, though the overall feeling is still somewhat negative. The index of current financial well-being has increased over the last three quarters from 71 to 78 to 89, a steady upward trend.

Despite the less positive view of the current economy, consumers have become increasingly optimistic about the future of the economy. Most are confident that the economy will recover throughout the next 12 months.

The index that reflects the outlook of the economy has moved up from 108 in the first quarter to 128 in the second and 142 in the third quarter. A more optimistic outlook is also found in recent predictions by the Ministry of Finance and Bank Indonesia. Both increased their full year growth forecast from 3.5-4.0 percent to 4.0-4.5 percent. The World Bank shares this optimism, naming their recent report about the Indonesian economy *Clearing Skies'.

The positive news has boosted consumer morale. 67 percent of the surveyed Indonesians think that unemployment will decrease in the next 12 months.

The outlook of financial well-being has also increased. The index increased from 126 to 154. 67 percent of surveyed consumers believe their financial well-being will get better in the next 12 months. In the first half of the year the confidence of Indonesian workers in their ability to keep their job and increase their income has remained strong. Now that the signs of economic recovery have become stronger, this confidence has increased further.

Despite the increased optimism about the future, consumers are still reluctant to do major purchases. The index that expresses this decreased from 52 to 45. 67 percent of the respondents indicated that this is a bad time to buy major household products.

The Indonesian economy relies heavily on domestic consumption. This makes consumer confidence a key factor in economic development. Therefore the continued increase of the Consumer Confidence Index is a positive sign for the Indonesian economy, which is expected by the government to grow by 5.5 percent in 2010. But even though consumer confidence rose above the neutral level, satisfaction with current financial-well being and particularly the willingness to do major purchases is still low. If these aspects will improve in the coming months, economic growth could be accelerated.

The third quarter measurement of consumer confidence in Indonesia took place in the first two weeks of September. The survey asks questions to 500 consumers in Jakarta, Surabaya and Medan regarding the economy and their financial well-being.

The Consumer Confidence Index is based on consumers' opinions about the present state of the economy, the outlook of the economy, the current status of their financial well-being, the outlook of their financial well-being and willingness to buy major household items.