Analysis: RI consumer confidence remains

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The KADIN-Roy Morgan Consumer Confidence index stands at 145.2, down by just 0.6 points in the month of June. The rating is currently 1.3 points higher than it was a year ago in June 2011 when it stood at 143.9. Cruising at these altitudes for such a long spell is world record-breaking, in many ways.

Responding to the June results, Indonesian Chamber of Commerce and Industry (Kadin) Chairman Suryo Sulisto said last Friday: “In today’s world, no country is an island. The dark clouds from the West are taking their toll on the East. China, India and now Vietnam are all slowing down. The euro has survived but its future rests on the EU increasing its fiscal and political ties.

The US job numbers are keeping the world’s leading economy sluggish. The global picture is going to look gloomy for a few more years at least. Against that backdrop, even as exports slow down, Indonesia’s economic outlook remains steady, much more than any other G20 nation.

That confidence comes largely due to continuing growth in the local consumer economy. If businesses continue to have faith in our local consumers, we can withstand the global winds, together. There is ample room for growth.”

That prediction is based not only on headline scores, but on all the key indicators. Other than export-driven businesses affected by the slowdown in the West, it would be difficult to find an industry in Indonesia that is slowing down. For those focussed on consumer products and services, there is hardly a ripple.

Across the board, demand remains strong. While most central banks around the world are pushing the levers to stimulate consumption, Bank Indonesia has gone the other direction and raised barriers to prevent speculative buying.

The real estate and automotive sectors in particular have received their attention. That’s how unique the Indonesian marketplace is, in sharp contrast to just about every major economy.

From almost every viewpoint, confidence in the consumer economy remains as strong as ever. The month’s negligible fall in the KADIN-Roy Morgan index was driven by a few Indonesians who wondered if now was a ‘good time to buy’ a major household item.

The weaker rupiah has taken its toll on the price tags of household appliances, both imagined and real, explaining the primary reason for the dip. Despite that sobering reality, 50 percent of Indonesians, down 6 points, continue to say ‘now is a good time to buy’ major household items. In contrast 44 percent, up 4 points feel ‘now is a bad time to buy’ major household items.

But this is offset by increasing confidence in both the short term and longer term prospects for Indonesia. In terms of the economy now 79 percent of Indonesians, up 3 points, expect the country will have ‘good times’ financially during the next twelve months. Only 20 percent of the people say we’ll have ‘bad times’ financially, down another 3 points from May. If the rupiah recovers some of the lost ground, we can expect the numbers of people wanting to buy major household appliances swell rapidly again.

Equally reassuring is the large and increasing majority of 88 percent, up another 2 points, who expect Indonesia will have ‘good times’ economically over the next five years. From the consumer’s perspective, both the short and longer term views look good.

The lon5-year indicator is now at the highest level since December 2011. Signalling growing faith, only 12 percent, down 1 point, expect ‘bad times’ economically for the nation as a whole.

Rising prices of everyday essentials affects consumer sentiment immediately. The price of commodities like rice, chillies, cooking oil or fuel at the pump has hit the index hard time and again.

While such essentials have remained steady in recent months, there is a noticeable fluctuation in the cost of meat, particularly beef. Another dampener is the now statutory 30 percent deposit required for any mortgages or car loans.

The average consumer who has felt these differences will reconsider personal fortunes, with 41 percent of Indonesians down 2 points in June, saying their family is ‘better off’ financially than a year ago.

At the same time only to 12 percent, down another 1 point, said their family is ‘worse off’ than a year ago. In tandem, now 60 percent of Indonesians, down 2 points, expect their family to be ‘better off’ financially this time next year. Down by a smidgeon, the massive majority remains upbeat. Only 5 percent, unchanged, expect to be ‘worse off’.

All factors considered, the confidence level of the average Indonesian consumer continues to shine like a beacon amid a dark global landscape. It is the envy of the world, reassuring for any investor looking at the insatiable appetite of the growing middle class. From apartments to air travel, mobile phones to credit cards, vitamins to fruit juice, the marketplace is ready and eager for more. There are no real signs yet of that appetite waning.

The monthly KADIN-Roy Morgan Indonesian Consumer Confidence Rating is based on 1,994 face-to-face interviews conducted throughout Indonesia, not just a handful of cities.

The survey includes the Top 21 cities, smaller cities and towns as well as many more villages in the rural hinterland, reflecting all of Indonesia. Men and women aged 14 and over were randomly selected during the month of June 2012.

The writer can be contacted at Debnath.Guharoy@roymorgan.com