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Consumer spending flattens during Ramadan
In the longer term, a significant factor contributing to the weakening of aggregate consumption is the shrinking middle class, the primary driver of economic growth.
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A man uses his phone while waiting for customers at a clothing shop in Tanah Abang Market in Jakarta on March 6, 2025. Buying new clothes is a common tradition among Muslims to celebrate Idul Fitri, which marks the end of the holy month of Ramadan. (AFP/Bay Ismoyo)
Lebaran, the Indonesian name for Idul Fitri, is a crucial event in Indonesia, home to the largest Muslim population in the world.
It is not just a religious holiday: It is a significant cultural event marked by mudik (exodus), the exchange of holiday allowances known as Tunjangan Hari Raya (THR) and a substantial increase in shopping. Various related activities contribute to the festive atmosphere during the holiday season.
Quieter Ramadan-Idul Fitri
However, the fasting month of Ramadan leading up to Idul Fitri was noticeably less festive this year. Many micro enterprises selling takjil (breaking-of-the-fast snack) experienced low sales. Shopping malls, usually bustling during the crucial third week of Ramadan, were significantly less crowded.
The absence of long queues typical of the holiday season strongly suggests an unusual pattern in consumer spending this year. This subdued consumer activity represents a significant departure from established trends, and is reflected in several macroeconomic data points.
First, monthly retail sales growth (IPR) in February 2025 was only 0.8 percent month-on-month (MoM), significantly lower than the typical growth seen in the month before Idul Fitri (12.2 percent MoM average in 2018-2024, excluding 2020). A more detailed analysis using clothing purchases as a proxy shows growth of only 0.6 percent MoM, compared to 23.8 percent in 2018-2024.
Second, the Mandiri Spending Index (MSI) indicates a flattening of consumer spending up to March 9 at a level lower than in previous years. Weekly MSI growth in the first week of Ramadan was just 1.4 percent compared to the pre-Ramadan period, versus 4.7 percent in 2024. Both indicators reflect slowing consumption, even during this special period.
